Lots of people dream of having their own small business. Why work for someone else when there is less job security and they are expecting more and more work from you?
However it is overlooked that to run a successful business, especially in the early years you need…
- Capacity to work hard
- Self –reliance
- Support of your family
- A skill or a good product.
Starting your own business takes determination, perseverance and self-discipline. Beware if you are starting for negative reasons, perhaps just because you dislike your boss or you like drinking in pubs and so thought it would be great to run a pub. Running your own business is a big step. Take time to consider and plan.
It’s not playing golf when you want and taking holidays when you want. There can be a lot of admin and red tape to deal with. The customer becomes your boss and they pay your wages.
Of all the tens of thousands of people who still start a business of some sort…
- By the end of the first year, 40% will have failed.
- Within 3 years, 56% will have failed.
- Within 5 years, 76% will have failed.
Of those who go past 5 years, there’s no guarantee they will survive the next 5 years.
So what are the common problems suffered by small businesses…
- The owners work too hard and for too many hours.
- Personal objectives of the owners such as hobbies and spending time with their family end up low down on the list of priorities.
- The owners spend too much time doing the day-to-day technical work rather than planning and managing the business.
- The owners don’t know where their business is going.
- The owners don’t understand that in order for a business to have a good sale value it must work without them.
- Many owners get frustrated and simply give up and go back to being an employee.
- The rewards don’t match the effort.
They often face common problems in managing their business…
- No consistency in delivery of their product.
- Can’t depend on their employees to get it right.
- They focus on people rather than systems, which creates problems when the people leave.
- Systems that are in place are not documented but in the head of the person who leaves.
- The owner ends up doing everything.
- Employees are not as diligent as the owners.
- The owner spends too much time filled up with other people’s problems and administration.
- The owner always has to supervise and guide employees.
- They have no idea how they compare with other similar businesses and competitors with respect to financial performance or non-financial areas such as human recourses, production, marketing, etc. They therefore don’t know where there are areas for improvement.
With regards to marketing these are common problems for small businesses…
- It’s done ad hoc rather than in a systematised way.
- They don’t know what works.
- They don’t fully understand why their customers buy.
- They don’t know who their most profitable customers are.
- They don’t measure their marketing results against costs.
- They take on customers they later regret dealing with.
- Bad debt problems.
Then there are the dreaded financial problems…
- Relying on short-term overdrafts to try to support long-term growth.
- Over relying on the bank due to over trading.
- No system for projecting income and expenditure.
- No system for measuring key financial indicators against their plan.
- Accounts are not useful to the business.
- Accounts are not produced quickly enough.