Many people ask me why it is that most small businesses fail. Although there are a number of sub reasons, there are 2 connected reasons behind every failed business I have ever studied.
Today, I am going to share these with you, along with some examples. I am also going to try to inspire you NOT to make the same, fatal mistakes.
The sun and the rain
When you starve something of the resources it needs, it dies. Starving a seed of the sunshine and moisture it needs, kills the seed. Starving a business of the resources it needs does exactly the same thing.
Yet, that’s what the majority of small business owners do. As a result they go broke or spin their wheels… then go broke.
Why do they do it?
I have asked a number of former business owners this question. They always (literally 100% of the time) gave the same 2 answers.
- To save money. They see all money out as a cost and don’t understand what an investment is.
- To avoid risk.
By refusing to invest in their businesses correctly and avoiding anything with a perceived risk, they ironically made it impossible to succeed.
How to kill a business
Here are some common areas, where former business owners refused to invest and paid the price:
- By refusing to hire a great accountant, they had unnecessary cash flow problems.
- By refusing to pay for a professional looking website, they lost sales leads and looked like amateurs.
- By refusing to insure their business correctly, they lost everything when hit with a big, uninsured loss.
- By refusing to hire a copywriter for their marketing, their response rates were 100’s of percent lower than they would have been.
- By refusing to pay a designer for a professional logo, they looked amateurish. People don’t trust amateurs.
- By refusing to buy the correct software and hardware for their business, they lost valuable time.
- By refusing to invest in professional quality web hosting. (I use WebFusion. That’s not an affiliate link, but they do sponsor my site.)
- By refusing to pay a lawyer for the right legal advice, they lost everything when legally challenged.
There are many, many more examples.
The answer of course, is as easy and as hard as this: Give your business the resources it needs. Learn the difference between a cost and an investment… not on a surface level, on a deep level. Think about the ultimate cost of starving your business of what it needs.
Just as importantly, ask yourself why you’re not investing where your business needs it. If your answer is “to save money and avoid risk”, I urge you to reconsider. Why? Because you are doing neither and simultaneously making it impossible for your business to succeed.
PS: Here’s some detailed advice with examples, on How to build a successful business.