Owning a successful business is a dream of a lot of people.
Many people see owning a business as the key to having the money and life they’ve always imagined.
Many people that start new businesses start copycat businesses to the businesses they previously worked for.
They figure that because they were successful in their jobs, they will naturally be successful with the start of a new business.
These people who were bright-eyed at the prospects of riches with their new business learn very quickly that there is more to running a business than there is to having a job.
Over the past eleven years, I’ve seen business successes and business failures.
Here is a list of my top three reasons why businesses fail.
- They don’t have a consistent customer acquisition system
- They run out of money
- They run out of time
Lack Of a Consistent Customer Acquisition System
Nothing happens in a business until the business makes a sale.
When I first started my accounting business, I believed all I had to do was print off some business cards, and I would get new customers.
I was naïve in my thinking.
I didn’t realize I had to do work to let people know how I could help them.
I had to sell and market myself to potential customers.
In the past, I was a shy person, and promoting myself was difficult.
Initially, my first struggle was to muster the courage to get over my fear of talking to new people.
Then I had to deal with the fear of rejection.
Then I had to deal with the rejection.
Initially, I took the rejections personally.
Over time I was able to disconnect someone saying no to my offer from someone saying no to me.
I recognized that not everyone was going to buy what I was selling.
I also recognized that there were two ways to get people to buy from me.
One avenue to obtain new customers was to sell my services to people actively.
The benefit of selling was that I established a set sales process where I repeated the same actions over and over with my potential customers.
The other benefit was that I was able to earn revenue quickly.
All I needed to do was talk to people regularly, listen to them, and educate them on how I could help them.
When people saw that I could help them, they bought from me.
The key to my success in sales was to meet with enough people and perform my sales activities consistently enough.
The second avenue of marketing is a longer-term approach.
Marketing is an education process, as well.
Marketing sends multiple messages to prospective customers to educate them on the benefits of using my services.
Many business owners start marketing and selling when businesses are struggling.
Then the sales and marketing start to work, and their business start earning more money.
Then the business owners get busy, and they discontinue their sales and marketing activities.
Then the businesses start to decline, and the business owners start marketing and selling.
It becomes a predictable cycle where the business has up and down cycles that mirror their sales and marketing activity cycle.
Running Out of Money
Money is the lifeblood of a business.
Money is like oxygen for a business.
When the money runs out, the business dies.
The first fatal flaw most people make with their business is underpricing products and services.
Many business owners take a haphazard approach to pricing their services.
They fail to recognize all the costs that go into running their businesses.
They look at the sales price of their products and services, and they look at the hard costs of those products and services.
Many times, they fail to include the following costs when they establish their pricing strategy:
- Owner salary
- Business Profit
Consequently, these businesses end up underpricing their products and services to a point where they actually end up selling their products and services at a loss.
The worst part is that they aren’t even aware that they are selling their products and services at a loss.
In this situation, growth has a detrimental effect because selling more products at a loss only leads to increased business losses.
Running Out of Time
Time is truly our most precious resource.
Time is the ultimate leveler.
Every person on the planet is only given 24 hours each day.
No matter how much money people have, they are only given 24 hours.
Here is a truth about time.
Most people get caught up in activities that are poor uses of their time.
The only true way to gain intelligence on one’s use of time is to track and review that time.
When I’ve tracked and reviewed my time, I was able to learn where I was spending my time.
I then recognized that a portion of my week ended up being busywork that added no value to my business.
When I stopped doing the busywork, I was able to redirect that time toward activities that were more valuable to me and my business.
There are three major reasons why businesses fail.
Businesses fail when they run out of customers, money, and time.
Business owners need to create systems to manage, track and manage their customers, money and time.
Without these systems, business owners are not able to have accurate intelligence on what is causing the business to fail.
Start keeping track of your customers, money, and time.