According to the U.S. Small Business Administration (SBA), 50% of all small businesses fail within 5 years. Most of these failures occur from one of or a combination of the following three factors; company vision, overestimating demand, and being in a saturated market. Not to mention, failing to reach out to a small business coach in time of need.
1. Not creating your company’s vision
The old adage that those who fail to plan, plan to fail holds true in business more than in any other place you can imagine. One of the most fundamental elements of a solid plan is first determining where you want to take your company.
What big problem will you solve and what is it that everyone in your company will rally around even in the most difficult of times. If you have clear vision and back it up with a mission that you can clearly articulate to your employees, it will attract the right strategy.
You will be amazed at how easily the strategies fall into place once you have the vision correct and communicate it clearly. Here is an excellent example of a well written mission statement for Ecolabs, Inc. who provides cleaning, sanitation, pest-elimination, and maintenance services.
Vision: The Global Leader in Commercial and Sanitizing Solutions
Mission Statement: Be the leading global innovator, developer and provider of cleaning, sanitation and maintenance products, systems, and services. As a team, we will achieve aggressive growth and fair return for our shareholders. We will accomplish this by exceeding the expectations of our customers while conserving resources and preserving the quality of the environment.
Unfortunately not all companies clearly communicate their vision to their employees. According to the Harvard Business Review, over 70% of employees do not know or understand the vision of the company where they work.
2. Don’t overestimate demand
Many small businesses fail because owners overestimate the demand for their product or service. Every business must first understand the overall demand for its product or services and then how it can service that demand better than its competitors.
What is different about your offering? Why will customer switch from their existing supplier to you and your company? It is rarely for a better price. Bankers, investors and customers want to know that you are in business for the long haul and that you have something better to offer than others in the industry.
At one time, Leapfrog was a unique company until it overestimated the demand for its products. “Battered by a growing variety of cheaper alternatives, LeapFrog, a dominant maker of educational toys and games, has watched its sales plummet.”
3. Don’t be the small fish in a large pond
Recognize that any market can become oversaturated and never rest on your laurels.
Denver, which is coined “the Napa valley of beer” has seen an influx of craft breweries in the last several years. Denver, alone, issued over 50 brewery permits in 2014. Although, breweries might be all the rage now, entering this market without a ton of industry experience, knowledge, and differentiating factor, will leave you in the dust. Make sure this doesn’t happen to you.
Set yourself apart from the crowd, find your niche and stick with it.
Every business must have a clear understanding of what makes them unique. The Entrepreneurial Operating System provides a clear step-bystep process to take you and your leadership team to the next level including the development of a clear vision and mission statement.