As a business owner, I hear from many people say that the business will fail, or that I will not see a return on investments (ROI) within the first five years. According to Bloomberg, 80% of businesses fail within the first 18 months. That’s 8 out of 10 businesses that will not make it to the 2-year mark.
There are many books, magazines, and articles written about business failure and just as many written about success. One of the key points among these writings is that you must have the drive and determination to be successful however, drive and determination alone cannot make the business a success. Someone once asked me what my plan B was if my business failed. I responded by simply saying, “my plan A is my plan B”. There is no other plan.
Some people start a business because they have a great idea. They hire a lawyer or CPA to complete the paperwork, create their business plan, find funding, then look for a location where the rent is reasonable, and they set up shop. The process could take time depending on the amount of thought and effort that goes into the above-mentioned scenario. Their business plan could be well written that the banks wouldn’t hesitate to loan the cash. A great business plan does not signal that the individual is an entrepreneur. It takes more that a great plan to make a successful business.
Being an entrepreneur is not an overnight thing. It’s not a class or workshop given in a few hours or in a day or two. It is continuous work done until the individual realize their dreams. A significant reason many businesses fail is unpreparedness. The business owners failed to do research about their industry, they failed to collect data about the demographic they intend to service.
Knowing your audience or customer is one of the single most important tools a new business owner can ever have. After all, the customers are the reason they went into business in the first place. I have heard business owners say, their product or service is great. “If a few customers don’t like it or get upset, it’s fine, you can’t please everyone.” That is a common mistake of many business owners. Even if the business is not working directly with the public but doing business to business transactions, they have customers, and those customers are all different. If the business owner does not know the customers the business intends to service; and gear the business operations and services toward those customers, the business is doom.
Market research is a very important piece in the entrepreneur puzzle. Knowing the competition holds significant value. During the market research phase of starting a business, the entrepreneur must learn about its competitors near and far. They must learn what sets them apart from the other businesses like them (I know, I know, the business has you, you’re the difference).
Researching the industry standards such as pricing for product and services, wages, and most importantly, whether the business is needed or will fill a void in the community selected to base the business is a must. Some communities can manage two nail salons and barbershops within a few hundred feet of one another but is it reasonable to put two supermarkets within a few hundred feet of one another? One will indeed fail almost instantly.
Part of the market research process is going out into the community and gauging the community, survey the people the business is to service to gain an idea how the community feels about the type of business being established. This step is important in understanding who the business serves. It’s also a great way for small business owners to feel welcome in the community, even if the owner is a longtime resident or affiliate of the community, the business is new and has it’ own identity. Ever heard the saying, it’s not personal, it’s business? The business owner could be a sweat loving person, but the business could be a different animal. For instance, putting a liquor store in a fairly close proximity to a church or school.
The bottom line, know who the business is servicing, know the neighborhood, know the competition, and keep well informed about things going on in the industry. If there isn’t much or nothing at all that separate the businesses, the customer service will always win. Know your customer’s name and use it often.
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