As a small business owner you want to know how to grow your small business right? Some business owners are content with the current state of their business, but for the most part small business owners always want to grow. The reason that most small businesses fail is because they don't plan for growth. They don't go through the appropriate analysis to see what affects their growth plans will have on their bottom line. They dive in and let their passion for their business and their ideas blind them. Before they know it they are out of business. It is possible to grow your business out of business. Below you will find the common reasons a business grows without a plan and inevitably goes out of business.
Not Looking Forward
Most small business owners are good at looking at their past financial performance but they fail to look forward. Building a small business budget every single year is a critical step that many businesses skip. Even if a budget is built most people never look at it again. It is important to compare actual results vs budgeted to look for variances. However, what is more important is to look at how your actual results affect the financial future of your business.
A budget remains the same throughout the year and a forecast changes with actual financial results as well as changes in your business environment. Each month you should take your actual results and put them into your forecast. You should then discuss any changes you anticipate in the future of your business. If you need to hire someone or make some major purchases put them in your future forecast. Blending your actual results as well as your knowledge of changes coming is what forecasting is all about. This is what is referred to as a rolling forecast. A rolling forecast allows you to get a glimpse of the future of your business and adjust before things happen to get optimal results. Good business decisions should be made based on logic, not gut feelings.
Too Many Sales
Another great way to drive your small business out of business is focusing too heavily on sales. Many people reading this right now are shaking their heads now disagreeing with me. Can too many sales be bad for your business? Most consultants will tell you that all you need to worry about is sales. Sales are important but driving them into a business that has poor operations is a one way road to failure.
Business owners need to focus on quality of sales; not quantity. Define your ideal customer, define a niche, and exploit them both. You want ideal clients, not just good clients. If you drive too many sales and operations are not ready for them your customers will notice as service slips.
Customer Service Slips
As I mentioned above if your operations are not ready for the amount of sales you are producing your customers will notice. Every business is in the customer service business and that is why it is so important. One bad review, one bad customer experience is enough to cripple your business. I place customer service at the top of my priority list. What good will a whole lot of sales do if your customer service stinks? Nobody wants to work with someone that does not offer good customer service and if you don't you will find yourself out of business pretty quickly.
Inbound Marketing Doesn't Stop
Many small business owners will tell you that inbound marketing is a waste of time. However, they only have this opinion because they have not had success with inbound marketing. A strong inbound approach is a great way to attract ideal clients so you don't always have to be looking for them. Inbound marketing is a long-term plan and it takes a while to get results. That is why so many small businesses do not have success with an inbound approach; because they don't give it the effort and time that it requires to see results.
The issue with inbound marketing is you can't really hit the off switch. Once you have success it can be difficult to slow down leads. Short of turning off your website you really can't stop a good inbound marketing campaign. Your reaction is "great I want all the leads I can get." I say go back to the previous sections on having too many sales and making sure operations are ready.
All Your Eggs in One Basket
Some small businesses have one client that makes up a huge portion of their overall sales. This is a huge no-no from my perspective. I have had clients tell me that they have a client that makes up 40% or even 50% of their total sales. They typically boast this and are proud of it. I hear this and my jaw drops because I am scared for them.
How risky is a client that makes up a huge portion of your sales? How many man hours do you have to dedicate to this on a weekly or monthly basis? What happens if this client fires you? You will be out of business right? At the very least you will notice if this client leaves you and it will hurt. As a general rule of thumb I don't like for any one client to make up more than 5% of the overall revenue of the business. While this can be difficult when you are first starting out it is a goal you should keep in mind as you grow.
Have you ever grown your business out of business or know someone that has?
What were the causes?
