Running a business is no small task, and the economy calls for extra preparedness when trying to keep your entrepreneurial efforts afloat. With an oversaturated market where competition is unfair due to a group of monopolies that set market standards and push out the little guys, an additional amount of caution is necessary to stay self sufficient in these trying times. But the question comes: why do businesses fall apart? What specifically can they do to stay on top? I’ve done a little research, and while I’m no expert, these are a few things I’ve compiled from other studies that you might want to keep in mind before starting your own business:
1) Misunderstanding Your Market
Business analysts and professionals all agree that misunderstanding your market is one of the biggest ways to fail, simply because sellers don’t understand who they’re trying to reach. In order to avoid this common mistake, it’s important for you to understand the specific market you’re in. Start by researching markets from the inside. Take polls, talk with consumers, read articles, look at what sells in the moment – do your homework. And especially look at your competitors. If something works for them, chances are it’ll work for you. If something doesn’t work for them, chances are – that’s right – it won’t work for you either.
2) Pricing Products and Services Poorly
When you price a product be sure to cover your price and then some, but don’t overprice your product either. There’s a local record store near to me that majorly over prices their albums to the point that I have started ordering from the independent labels instead. Don’t be them – price your products fairly and build brand loyalty as such. Cover your costs make sure employees are paid, whilst choosing a price that is fair to the customer. You want products priced low enough to be competitive but not to lose you money and profit. Moya K. Mason put it best; “You can be the cheapest or you can be best, but if you try to do both, you’ll fail.”
3) Differentiate Yourself
You can’t survive in a market by being a carbon copy of something else. It takes the fun out of running a business. Part of the appeal behind entrepreneurship is the individuality aspect. So, be different and try something outside the box. Try new things. Google and Apple – two of the highest ranked companies for market value in U.S. Dollars – are known for their innovation, the former of which has even rewarded employees for innovation failures. Eric Wagner at Forbes wrote an article that has some pretty good insight on product differentiation.
This quote from his article about the brand of his writing is also applicable to other small businesses:
“You may or may not like [my] writing style, but it is unique. It sets me apart from other writers on Forbes and thus, it’s one of my personal [Unique Value Propositions or UVPs].
Now go uncover yours.”<
4) Backing Up Your Work
Data loss may have more to do with small business bankruptcy than you think. According to Back Up Assist’s blog, “Over two thirds of business have been taken down by data loss.” According to a CSID study, over 68% of small businesses have said they have no strategy to recover from data loss or data breach, and 90% of small businesses in the US have no plan to protect themselves or their customers with data storage. In order to become a well-established successful business owner, be sure to keep your information safe and secure!
5) Profitable Business Model
While this should be a no brainer, you can’t go into business without a plan. If you choose a business model that has no proven revenue stream, then what are you really doing in this industry? Not only does market analysis matter, but intentionally setting yourself up to succeed in your market has an even bigger impact is equally important.
Luckily, we live in a world of countless successful and failed businesses. That said, you have a lot of people who have walked this road before to study and learn from. Do your homework on them and take that into your future as a small business owner.
6) Poor Accounting and Financial Management
When you start your business, you should have enough in cash reserves to carry you through at least six months. If you don’t have enough capital to start with, figure out how to obtain more. It doesn’t hurt to learn the basics of accounting (especially know that the assets must equal the liabilities). Understand how to organize your revenue, especially how much you put in compared to how much you got out of it. Once you’re aware of this, you’ll know when to get out and when to stay in your industry. Overall though, be prepared to whether change, as each industry goes through it and you need to be adaptable.
What do you have to add? Let me know over at Twitter.