Running a small business presents a whole set of unique challenges and problems, and you need to make several decisions in the early stages of operations to prevent business failure. Educating yourself about your target market and developing a solid plan are just a few things you can do to be successful, regardless of the industry you’re in.
Many businesses have failed because they ran out of financial resources, so it’s important to make financial management a top priority. As a small business owner, I’ve found that planning for major expenses at least three months in advance and mapping out projected revenues each quarter helps to keep the financial end of the business on track.
Here are five other things small businesses should do to avoid failure:
1. Review data and reports regularly. Neglecting “the numbers” in hopes that things will just improve by themselves will lead to business failure. Get into the habit of reviewing your monthly revenue reports, take a close look at expenditures and monitor your budget so that you’re not overlooking some serious problems. Remember that many small problems will grow and escalate if they are not addressed early. Take the time to identify any potential problems in operations so that you are putting your business in the best possible position.
2. Recover from mistakes as quickly as possible. You can expect to make mistake – many mistakes – as a first time small business owner, but the key to success is learning from them and recovering as quickly as possible. Don’t let a single mistake lead you to believe you’re doomed to failure. Recognize the misstep and do your best to avoid making the same mistake again.
3. Hire the right people. Poor management and high employee turnover can be the downfall of any small business. Make sure you’re hiring quality people and take the time to learn as much as possible about the candidate before making your final hiring decisions. Hiring the wrong people can put you on the fast track to business failure.
4. Control your expenses. Insufficient capital and lack of financial resources is a common problem for many businesses that eventually fail. Avoid failure by keeping your expenses under control and create a financial plan to keep the business on track. If you don’t have strong accounting skills, hire a professional accountant to help with creating a budget and for allocating expenses.
5. Grow slowly. Overexpansion can lead to small business failure because it becomes incredibly challenging to manage a lot of employees, keep expenses under control and ensure that you are generating a strong profit. Be patient and plan to grow your small business slowly and steadily. Focus on increasing cash flow each quarter and stay within budget to enjoy long-term success.