There are many reasons for the staggering failure rate of small businesses. Some consistently stand out more than others. Fortunately, for every weakness there is a cure. Improving upon these weaknesses, recommending solutions, and mentoring small business owners is a major role for a small business consultant.
Prevalent weaknesses for why small businesses fail are:
1. Lack of Basic Knowledge
While many small business owners know the technical aspects of their businesses very well, they lack the basic knowledge in all core functions necessary to operate a business through the various organizational life cycles.
It is this wide diversity of knowledge that is necessary for survival, success, and growth.
2. Lack of Understanding of Strengths and Weaknesses
Small business owners must know how their businesses fit into the competitive landscape in which they operate. A business cannot improve if the owner does not understand its internal strengths and weaknesses. Without this knowledge, it is also difficult to ascertain market opportunities or recognize external threats that might hinder a business.
3. Lack of Finances
Cash is king in a small business, but many small businesses operate day-to-day simply hoping for better results tomorrow. A business owner must know what products or services bring in the most profit (dollars and percentages), what expenses are out of line, and whether the business will be cash flow positive in the future. A general lack of business finances and poor cash management is a partnership for disaster.
4. Lack of Planning
Planning is important for any business regardless of size. Small businesses must establish growth objectives that include operations, sales, marketing, employees, etc. Planning creates a proactive rather than a reactive environment in a business.
5. Lack of Understanding of Customers’ Wants and Needs
Many small business owners are so swamped with work that they never take the time to “step into the shoes” of their customers to see and experience their business from another vantage point. It is important for a business owner to understand what customers like and dislike about the business, how the competition differs, or what the customers desire most when dealing with the business.
6. Lack of Spending Time In The Little Things
Little things in a business mean big things to employees, customers, vendors, bankers, and other business relationships. The lack of detail and follow-up, especially when dealing with customers, will always result in a lack of customer service and retention, which is not a recipe for business growth.
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