For many people around the world, creating their own small business and growing it into something major is a dream. The hard work and discipline that are required to accomplish this task are no joke, however, and the intensity of these factors has resulted in many businesses failing over the years. With that said, if a person takes the time to learn the risks when starting a small business, along with beneficial tips for growing that business, they can set themselves up better for success than the competition.
How Many Small Businesses Are Formed Yearly?
To put into perspective just how stiff competition can be in the small business space requires looking at just how many businesses are created annually. The U.S. Small Business Administration conducted a survey from March 2020 to March 2021 during the Covid-19 pandemic to see how many small businesses were opened during this impacted period. Even amidst a global pandemic, they found that roughly 1.1 million new small businesses were opened in the span of a year. During a standard year outside of the pandemic, it would not be unreasonable to expect this number to be even higher.
What is the Risk of a Small Business Failing?
Naturally, considering the above statistics, it’s surprising to think that more small businesses aren’t seen in the economy today. Unfortunately, this is because starting and succeeding with a small business are two very different things. Data from the Bureau of Labor Statistics has found that around 20% of new businesses fail within the first year, 45% during the first five years, and 65% during the first decade.
After fifteen years have passed, only around 25% of the businesses formed will still be around. This means that of the 1.1 million businesses created between 2020 and 2021 during the pandemic, statistically speaking, over 200,000 have already failed by the current year of 2023.
Common Factors Which Lead to Business Failure
Given the high failure rate of small businesses, it’s only natural to wonder what the leading factors for this failure are. Most prominently, these factors include:
A lack of business plan or general poor planning with the business
A failure to understand modern consumer behavior
The mismanagement of inventory once the business starts to grow
Not understanding how to manage growth
A refusal to pivot away from the original vision for the business
Lack of sales or interest in the business
Not understanding how to market a product or service
Trying to do everything at once all by yourself
7 Tips for Growing a Business Quickly
All of the above common reasons for small business failure are daunting in their own right, which is why learning how to not fall victim to those common factors is important. To that end, consider each of the following tips for growing your small business faster than ever before:
1. Use the help of consultancy services
At the end of the day, your knowledge specifically centers around your product or service. Leave certain aspects of the business, such as marketing and advertising, in the hands of capable professionals who you bring on as consultants. For example, a consultant in Houston is familiar with that market specifically, which gives them insight into the effective marketing strategies for that area.
2. Focus on establishing consistent revenue sources
It’s fine to want to branch out into new products or services as your small business grows, but you must first establish a consistent revenue source for the business to fund that new venture. Whether it’s your initial product or one that consumers simply love out of your entire product line, having a consistent source of revenue will help dramatically.
3. Place an emphasis on enhancing customer service
The customers of a business are the focal point for success, which is why placing an emphasis on improving customer service is so important. Take the time to poll your customers to figure out what works and what doesn’t, as well as to see what products or services they would like most.
4. Learn to spot what your competitors are doing wrong
Part of being a successful business is doing what your competitors are not doing successfully. Study the competition and see why a certain product or service is not selling well in order to determine whether there are insights you can glean which may help improve your own business.
5. Utilize services which allow you to monitor customer decisions
In the modern day, access to insightful business data is everything. Specifically, knowing why customers make certain decisions can help a business change their strategy to mirror what their customers want. Whether it’s cloud-based data or something else entirely, find a way to review customer decisions.
6. Hire the right individuals
A small business is only as successful as its weakest link and having someone in a role at your company which is not ideal for them is a quick way to run into issues. Rather than being forced to deal with this, take the time to research many candidates for a role so that you can be sure you are hiring the right person for a job.
7. Understand when to cut your losses
Finally, all business owners should know when to cut their losses, especially if their livelihood is tied up in the business. If your small business isn’t growing successfully, take the time to reevaluate and relaunch, rather than doing something that isn’t working.
The Bottom Line
Starting and growing a small business will take perseverance, dedication, drive, and much more. At the end of the day, though, passion can only take you so far. Use all of the above tips to set up a strong foundation for your small business so that you can quickly grow and scale your business over time. Don’t be afraid of failure as this may lead you to stay conservative with your business growth, rather than taking necessary risks. Find a mentor in your industry who can help coach you once your business begins so that you can continue the explosive growth you’ll experience with the above tips.