If you are a business, you need to operate with circumspection. No, not because it’s a guarantee for growth. Because it could save you from failing. It may be hard for you to grasp, but chances of failure are always there, even when you are an established business.
As always, small firms are more likely to fail than large firms. So, if you own a small company, you might find value in this article.
Here I am listing down three ways a business, especially a small business could fail.
Not understanding data
There’s a reason big data is ubiquitous in today’s business world. Big data or pattern recognition can help you better understand your customers, their preferences, the most opportune time for approaching them, likelihood of bagging leads and the odds of closing a sale. But so many businesses – mostly small-scale and locally owned – underestimate data.
The biggest problem of ignoring data is inability to understand the pace of scaling. The economics of scale tells us competitive advantage lies in small scale and in zero scale. Here’s the link to a research paper that studied the competitive advantage of home-based businesses. The researchers concluded that repair services that advertise on Yellow Pages and hold membership of a national chain don’t always get positive customer ratings.
It’s only a misperception that small scale lacks competitive advantage. Truth is, competitive advantage is always there, and for all types of businesses. However, identifying it is heck of a job. Unless you dig into big data, you can’t identify it. So, never make the mistake of thinking big data is not important, especially if you are a small business. Install state-of-the-art software to collect customer data and see if you can find any pattern there.
Under/overestimating cash supply
Small businesses need to be realistic. Large businesses can make mistake and learn from those mistakes. But for a small business, a mistake can be very upsetting and financially disastrous. One mistake many small business make is they either underestimate or overestimate their cash reserve.
What happens when a small business overestimates its cash reserve? It spends on unnecessary stationery items. Or might hire people who’d later become a burden on the company. Every business – regardless of size and scale – must have realistic goals. Overestimating cash reserve causes a business to pursue unrealistic goals.
Underestimating the cash reserve is equally troublesome. It limits growth opportunities. If you are too shaky and hesitant and refuse to spend money, business will never grow. So, understand what your business requires for steady growth. If it means hiring new staff, go for it. Just make sure they are efficient. If it means opening new branches, go for it, but only when you are certain new branches will give your more business than the existing branch.
The bottom-line is you should be level-headed about your business. To think you have enough money and to think you don’t have sufficient operating balance are both mistakes you want to avoid.
Outdated marketing practices
The advertising industry is growing at a phenomenal rate. Brands are changing their outdated strategies to catch up on this growth. As a small business, you don’t want to be left out as employing the right marketing strategies could mean your ascension into a brand.
You need to revamp your existing marketing techniques. Don’t discard the strategies you are following now. Improve on them. Let’s say for example, you are a retail merchant and you have items on display for customers. Are these items placed strategically? Strategic placement means placing low-selling items in high-traffic areas.
This is just petty technique. You can churn out custom techniques yourself. Local restaurants, coffee shops, grocery stores often provide free WiFi hotspot to customers so that they arrive more frequently at the stores. For B2C stores operating in consumer retail, coupon deals are a great way to increase outreach. B2B companies can harness webinar marketing and connect to large companies who might one day become their clients.
These are not copybook marketing strategies. These are niche-specific, industry-specific and most importantly, company company-specific. Archaic marketing techniques, on the other hand, are too generic to rely on.
Marketing is evolving
That’s right. You need to keep pace with this evolution in order to stay on top of things. Many small businesses in the United States (and many outside the US) don’t understand this and as a result, they lose it.
It’s wrong to think small businesses lack competitive edge. The truth is, some opportunities are exclusively available for small businesses. The three tips discussed here can deliver insight into the fails that small businesses must be aware of. If a business avoids failing and excels at marketing, it’d have no difficulty getting clients. Hence, if you are a small business owner reading this, save yourself from failing.