It’s a story you hear all too often. A person opens a small business with dreams of breaking new ground and providing an experience customers can’t get anywhere else. Not even five years later, they’re shutting their doors and wondering how it ever went so wrong.
I wish this was a rare occurrence, but it’s not. In a Small Business Administration report cited by Forbes, only 50% of small businesses reach their five-year anniversary. Less than 20% make it to 10 years.
Those aren’t encouraging numbers. The good news is that many businesses fail because they make some mistakes that are very easy to avoid. We’ll discuss four of them below, and offer you some tips to avoid repeating the same, destructive patterns.
1. Stop Trying to Attract Everyone
The first thing you need to understand, and should have realized before you opened your doors, is that not everyone will buy from you. It makes sense, right? If I’m not an artist, why would I shop for paints or brushes? Whatever your industry, there’s a specific group of people who will buy from you. These are called your ideal buyers, and they are the people you need to attract.
To determine who you want to be your ideal buyer, entrepreneur.com says to take the following steps:
- Characterize your products and services from a buyer’s standpoint. What’s different about you, and how will it help customers solve their problems?
- Determine when and how your customer buys. Is it during a certain time of year, or when certain conditions have been met.
- Determine how your customer prefers to get information. Do they surf the web, listen to the radio, read magazines, or something else?
- Make a basic persona for your ideal buyer based on location, education, age, occupation, and income
Once you have a good composite of your ideal buyer, you’ll have a better understanding of what they find attractive in a business.
2. Stop Buying Cheap Equipment
Every business has to reduce costs while increasing revenue. That’s understandable. What isn’t is continuing to buy cheap equipment with a low standard of quality.
This is especially true if you run a restaurant, a coffee shop, or something similar. In businesses like these, your quality is your second most important aspect. Only customer service is more important. The type of equipment you’re using to run your company has the potential to make or break or business. You can’t reduce costs at the expense of quality and efficiency.
3. Stop Low-Balling Your Prices
Many small businesses tend to operate at a loss simply because they don’t charge enough for their services. The feel that since they’re the new kid on the block, the only way they can stand out is by charging less than the competition. You’ve got to set a price that will allow you to build a solid base of customers, generate more money than you spend, and stay competitive.
The National Federation of Business recommends that you watch for these common signs of under-charging:
You Put in More Work Than the Money is Worth
If you’re working much longer hours than other businesses just to make ends meet, you’re charging too little. Don’t get me wrong – it isn’t unusual for owners to keep working until about 7 or 8 pm after everyone else has gone home. But if you’re up until the early morning hours consistently, and still barely profiting, you’re not setting a high enough price.
Your Client Base is Rude and Critical
Quality buyers understand that you need to make money. They’re willing to pay for a premium service and will show you respect and courtesy. Low-balling customers will criticize you and complain constantly because they want you too scared to raise your prices.
You Haven’t Experimented with Price
If you’ve only ever had one price, without testing a higher one, you’re probably charging too little. The NFIB says that businesses tend to underestimate how much customers are willing to pay. As a result, they set their sale price too low from the beginning.
4. Stop Avoiding Marketing
You may offer the best service, at the best price, with the best support package in the world. If no one knows about it, they won’t buy it. Common sense would tell you that’s the case, but many businesses still rely on customers finding out about their service on their own. No matter what type of business you run, you’ve got to have some form of marketing to get the word out.
You don’t have to devote half of your budget or download every piece of marketing software to have a successful marketing strategy. Often, the best type of marketing is organic, such as word of mouth and online reviews. You don’t pay for them, you may not have even asked for them, but they’re powerful nonetheless.
Your Ideal Buyer is Your Marketing Start Point
When you’re selecting the type(s) of marketing to use, look at your ideal buyer profile first. How they prefer to digest information and learn about new services will be a critical factor to consider. If they prefer email advertising, you need an email marketing campaign. If they get most of their ads from the radio, you need to purchase some air time.
However your ideal buyer prefers to get information, that’s your primary marketing venue. You can expand to new ones as your business grows.