We can’t all be successful all of the time. However, for some, it is the simple things that lead them to struggle much more than they need to.
1. Failing to plan
A common problem for SME owners is spending all of their working hours – and many more at home – working IN the business rather than working ON the business. Many of you will have heard that expression and anytime you say it to business owners they’ll give that knowing smile and say that they are all over it and will definitely get into some planning, just not this week because they are slammed, but they will definitely get into it. A year later and we’re having the same conversation.
This is where planning comes in. A good business plan will outline the reason the business exists and will then detail strategies that can be implemented to achieve your goals. Regularly reviewing the plan allows you to see what has worked and what hasn’t so you can be constantly adjusting to help ensure you succeed.
2. Poor cash management
Failing to manage the cash flow in your business can lead to failure. It has been reported that two thirds of businesses fail because of cash-related issues and the vast majority of those failed not because they were operating at a loss (they were profitable), but they weren’t managing cash properly and they ran out of money.
Managing cash effectively isn’t complicated, it just requires proper systems to be put in place and for you and your team to stick to them religiously. Make sure you’ve got the following systems covered off at a minimum:
* Cash flow forecasting
* Debtor management
* Client contracts
* Expense approvals
3. Lack of a unique selling proposition
For every genuinely unique business offering, like Uber, that comes to market there are hundreds of people opening yet another graphic design agency or accounting firm or bakery or whatever. Failure to differentiate your offering means that your business is likely to get lost in the noise of the marketplace and this is where having a unique selling proposition (or USP) comes into play.
You don’t have to be the next Uber, but what you do have to do is clearly identify what makes your business unique. What is it that makes it stand out from the competition? The following should help you on your way and we are primarily thinking of service providers here, but the same logic applies to businesses producing goods.
* An industry niche (e.g. we only service gym owners)
* A product niche (e.g. we’re a design agency, but we only do logos)
* A demographic niche (e.g. we service women over 65 in inner-west Sydney)
What you can see here is that these categories are very specific and suddenly you’re no longer just another insurance broker, now you’re an insurance broker that specialises in dental surgeries. Remember we’re talking about small-to-medium businesses here and we’re not looking for market share in the same way that a supermarket does.
4. Lack of clear leadership
Most people who start their own business are great at what they do and so they figure they could run their own business doing the same. Most people who start their own business do not have any kind of management training and many don’t have experience at managing and leading a team.
There is a difference between managing people and leading people. Much has been written on this subject, but simply put, leaders have people that follow them while managers have people that work for them.
A good leader is able to create a vision and direction for the business, sell that to their team and then have them deliver on it. A tricky one to overcome as a business owner, but something that all successful ones must address.
5. The wrong partner
Another common problem is being distracted from greatness because you’re spending your time cleaning up a mess from a business partnership gone bad. There are many issues involved when a business partnership goes south including:
* Legal disputes
* Tax matters
* Financing cash settlements
* Splitting of clients, staff, property, etc.
* Reputational damage
Not always, but many times this situation could have been avoided if the partners had done a bit more due diligence before getting into bed together in the first place (I suppose that could apply in all areas of life!). Whether it’s a new business venture, taking on a partner or investor in a new business, allowing staff to buy a stake in the business or something else, make sure you do your due diligence before signing on the dotted line.
Written by Ben Fletcher, managing director at Generate. A version of this article was originally posted on their Better Business blog.
Generate are not your typical accountants. We provide operational and strategic support to creative and innovative businesses of all stripes and colours.