At Community Futures, we work with entrepreneurs all day, every day. This provides us a unique perspective into the habits and mindsets of business owners, and what differentiates successful companies from those that struggle to make a profit.
Based on these insights, Community Futures has compiled a list of the five most common reasons why some small businesses fail within the first few years. Most importantly, we have provided proactive solutions to these issues so you can be sure to avoid the following stumbling blocks when building your own company.
- A missing compass
Most entrepreneurs start their companies with a mission in mind—a purpose that guides their small business’ products, services, and standard of customer service. Community Futures client Candace Lipischak, for instance, founded Fat Daug-Hand Carved Antler Jewelry in order to honour her family’s Métis heritage while creating unique pieces that customers could enjoy for life.
Unfortunately, as small businesses grow they can get caught up in their success and forget to remain true to their brand, ultimately alienating the customer base that led to their success in the first place.
When making important decisions, from hiring team members to designing new products and services, always remember to come back to your purpose and values. In fact, it’s a good idea to write your small business’ mission, vision, and values on a sheet of paper and post it somewhere conspicuous, such as your refrigerator or office desk. Seeing your company’s “compass” every day will serve as a constant reminder of why you launched in the first place and where you should be headed.
- Minimal market research
You think that your small business idea is great… but how do you know that others (i.e., paying customers) will feel the same way? The answer: market research. Gathering data and interviewing potential customers is the best way to determine whether your idea could be financially successful, as well as where—and to whom—you should sell.
Many startups that fold do so because they didn’t spend enough time doing market research in the beginning stages, when they would have realized the lack of demand for their products or services. Don’t make this common mistake! Be sure to do your homework ahead of time.
Tip: When researching your small business ideas and improving your products/services, check out these 7 questions that customers wished you asked!
- An incomplete business plan
Great market research, discussed above, is one part of a comprehensive business plan. In addition to gathering data about potential customers, a business plan helps entrepreneurs to nail down essential information such as:
- Financing options like utilizing small business loans
- Appropriate pricing for products and services
- Marketing and sales strategies
- Financial planning
- Supply chain management
- Risk analysis
All aspiring small business owners should take the time to complete a comprehensive business plan. The process can be time-consuming but it will make your life easier down the road and help to ensure that your new small business is positioned for success from the start.
Tip: Do you have a great business idea? Download our free business plan template and explanatory workbook here, and then reach out to us at Community Futures to learn more about next steps!
- Weak or inconsistent marketing
Love it or hate it, marketing works to get prospects through the door. It’s the truth: entrepreneurs who consistently leverage effective marketing strategies tend to cultivate stronger, more appealing brands than those who don’t. In fact, 90% of all marketers claim that social media marketing has generated more exposure for their businesses.
On the other hand, companies that don’t regularly employ marketing tactics often struggle to reach new customers and engage existing ones for repeat purchasing, referrals, and stronger branding. The lesson here? Make marketing a habit in order to manufacture a consistent trickle of new business coming into your company.
Tip: Accomplish your marketing strategy in less time! Build buzz in just minutes a day.
- Crippling self-doubt
Ask any entrepreneur and they will tell you that they’ve experienced times of stress and self-doubt. While building a small business usually leads to greater self-confidence and a sense of accomplishment, the entrepreneur’s journey is also filled with some challenging moments. That’s perfectly normal! The key is to not let negative feelings get out of control and impair your success. Believing in yourself, your ideas, and your ability to design a rewarding life is the first step to creating a thriving small business.
In those inevitable moments of self-doubt, be sure to rely on your support system like all of us at Community Futures. We’re always happy to help address your business-related questions or concerns!
Don’t let self-doubt win; it’s time to turn your big dreams into reality. Explore these 17 Life-Changing Reasons to Start a Small Business in Rural Manitoba!