Just about anyone can start a business.
Once you fill out a few forms, get the necessary permits or licenses, offer a legitimate product or service, and advertise it a little bit, it’s safe to say you’re a business owner.
Running a successful business, though, is an entirely different story. Several factors affect the success of a business that can be internal or external. In this article, we’ll share the latest data that you need to know before opening a small business, the main reason they fail, and a few pro tips on how to run and maintain a successful business.
Here’s a table of contents to help you navigate the important information you need to know:
In the United States roughly 1 in every 12 businesses both new and old close each year. On the flip side, more than 4 million were opened in 2020 alone which is the biggest surge the US Census has reported in over a decade.
According to the U.S. Census Bureau, the overall number of business applications dropped in early 2020 as the Coronavirus pandemic emerged, then sharply increased mid-2020 and continued to rise (adjusting for seasonality) through Q1 of 2021.
But, the census data also shows the number of planned wages (WBA) and high-propensity (HBA) business applications is up nearly 45% in January of 2021 compared to December of 2020 — and that’s with seasonality factored in. That’s good news.
And even though the failure rate for new businesses is somewhere around half, with about 50% calling it quits after the first five years, it does mean that 50% are surviving past the five-year mark. The outlook depends on how you view the proverbial glass — half full or half empty.
The Bureau of Labor Statistics says that almost 80% of new businesses make it through their first 12 months. Although that might surprise you, it’s definitely a much better statistic to focus on.
The specific numbers change depending on the industry, so keep that in mind. Some industries, like healthcare and social assistance, have a much higher-than-average survival rate. Others, like construction and transportation, have rates that are lower.
Why Businesses Fail
There are, of course, a myriad of reasons why a business might fail. According to research, though, there are a few that are more common than others.
No marketing. If you build it, they will not come. The presence of a marketing strategy is one of the telltale signs of whether or not a business will make it. Marketing spans everything from finding customers to upselling them on new products and services later.
Poor customer service. With new businesses popping up literally overnight, price and product aren’t enough to differentiate you from the competition. How you treat your customers is. Invest in
training your customer service team (or yourself if you’re the only employee) on the best practices to delight your customers.
No plan for scaling. People start businesses for many different reasons. Some want to make ends meet with a side gig, others want to replace their full-time job and be their own boss. Whatever your reason is, decide upfront whether you want your business to scale beyond just you as an employee. Sometimes, marketing is unpredictable.
Businesses go viral for doing great work and aren’t prepared for the influx. Knowing in advance whether you’ll meet the moment or let it pass can save you from FOMO, or even having to close your business because you lacked the preparation needed to scale.
No need. A great service or product will get you nowhere if there’s zero need for it. Due diligence and market research are essential in the early stages of starting a business. Determine who would buy the product, how often, and why. This helps you not only find your niche but adequately plan inventory and forecast sales, too.
No money: Launching and building a business is expensive. You need capital, investments, loans, and/or revenue to get you through the lean times. A
detailed budget can help you keep track of revenue and expenses.
The wrong people. The most successful business owners and entrepreneurs know to surround themselves with people smarter than them. If you decide to scale your business, you’ll need a strong team to help you do great work. The only way to do this is by
recruiting and hiring the best people.
Too much competition.
If the market is already saturated, and there are already plenty of established providers, you’re fighting an uphill battle.
If your prices are too high and you limit your customer base. If they’re too low and you’re not pulling in enough revenue to stay afloat.
But that’s not all. There are plenty of other reasons why businesses fail that are specific to a business and industry. Taking the time to get honest feedback from customers, employees, and external stakeholders unaffiliated with the business can help you spot these red flags before it’s too late.
If you’re planning to start a business, You must actively work to make it successful. It won’t happen overnight. You’ll need to research, study, and learn about your industry, customer, and market inside and out.
You have to start at the beginning. The old adage that you must look before you leap applies not just to your business (i.e., market research, professional goals, buyer personas) but also to you personally.
1. Understand the marketplace and define clear KPIs.
Don’t underestimate the importance of conducting careful, detailed market research.
You need concrete data on your ideal customers, the existing competition, expected growth and demand, market trends, and more. These types of insights are invaluable and help you make informed business decisions and goals.
You’ll also need to be clear on the four Ps: product, price, promotion, and place. They can guide the creation of your market research, marketing plan, and customer personas, and serve as a fantastic starting point if you’re not sure where to begin.
The four Ps of the marketing mix are evolving, and you might want to explore the eight Ps that more accurately reflect modern marketing. They include product, price, place, promotion, people, process, physical evidence, and performance.
With business goals and research in hand, don’t forget to think about what you want personally, too. There’s a reason why airlines instruct us to place our oxygen mask on before helping others: if we don’t take care of ourselves, we can’t take care of someone else.
Likewise, if you don’t have personal goals and plans for your mental health, you won’t be as effective in running your business.
2. Draft a business plan.
Whether you create a formal business plan, or simply document professional goals, workflows, or anything else, these thoughts need to be written down somewhere and shared with all of your stakeholders.
In the digital age, this is easier than ever before. A living document stored in the cloud and accessible to everyone not only allows for consistency and collaboration but for evolution over time. Changes can be made, saved, and shared automatically.
It’s not enough to simply set goals and processes. Research reveals that we are actually more likely to achieve and remember them when we write them down. We learn better when we create rather than just read.
Make a plan. Set goals. Create workflows. And write them down.
3. Set revenue and profitability goals.
For a business to be successful, it has to make enough money to sustain operations and turn a profit that can be re-invested for future growth.
Factoring in your business costs including sourcing, production, staff, capital, and more, determine how much money your business needs to bring in on a monthly, quarterly, and annual basis to succeed.
This is also a great time to revisit your pricing structure. Are your products priced appropriately? How many units will you need to sell each period to reach your revenue and profitability goals? Document and lay this information out clearly so you know exactly what you need to do to keep your business running and thriving.
4. Create a fantastic human resources team.
Businesses often overlook the power that culture and employee engagement can have on all fronts of the company, from recruiting to exit interviews.
“Good HR teamed with an arsenal of great tools can change your company for the better,” says Ali Anderson of BambooHR. “Happy, engaged employees do great work, and company growth will quickly follow.”
According to Anderson:
When companies invest in their training and onboarding processes, they’ll find their employees are more prepared to do great work and take on the challenges of the business.
Taking steps to measure and improve employee engagement and employee net promoter scores can increase productivity, improve employee sentiment, and make your employees more likely to recommend your business to their friends.
Monthly or quarterly performance discussions build team camaraderie and improve employee mental health. These meetings can also create an environment of trust, which leads to greater innovation.
Small businesses can attract rare candidates by having a positive culture, a strong career track, and well-trained, unbiased recruiters. “A supportive culture and a strong career track are key to attracting the best of the best,” agrees Taylor Dumouchel of Peak Sales Recruiting.
“Top professionals seek respect, not just within their immediate teams, but throughout an organization; they want to work for companies that value what they do. In order to recruit top talent, executives need to highlight their positive and supportive culture and underscore how they recognize that their positions are a part of the major drivers for company growth.”
Good HR teams with an arsenal of great tools can change your company for the better. Happy, engaged employees do great work, and company growth will quickly follow.
5. Hire the right employees.
Don’t just build any team — build a superteam.
As budget and demand allow, surround yourself with experts in things that you are not. Ask for input and feedback from them. Involve them in decisions that will impact them directly and indirectly to foster greater investment in what you’re building, and to make better, more informed decisions together. When you win, you all win.
But that’s not all. “It’s important to develop a clear onboarding strategy for employees and a system for measuring results,” says Nico Prins of Launch Space. “Putting systems in place will help as you scale the business, especially if you’re expanding quickly, and reduce the amount of time and work associated in dealing with inevitable staff turnover.”
The number one mistake entrepreneurs make is trying to do too much. Don’t try and do everything yourself. No matter your stage or size, there are low-cost and accessible ways to get some things off of your plate.
“Outsource to experts and pay by the hour when you can’t afford or don’t need full-time staffing for a skill set,” suggests Giles Thomas of Whole Design Studios. “Productized services are the simplest thing to buy as you see what you get upfront and don’t get any nasty bill-by-the-hour invoices at month’s end.”
Many new businesses neglect to take care of their employees — and what the business leaders don’t realize is that the company culture is created when the company is still new.
Successful business owners and leaders delegate to employees, freelancers, and consultants as necessary. This lightens the load on full-time employees and lets you and your team focus on your specific areas of expertise.
6. Offer benefits for staff.
A key part of building a strong team is making sure your team feels motivated, incentivized, and well taken care of so they can effectively do their job. This is why offering benefits for your staff is so important.
As you make hiring decisions, factor in how much budget you have to cover employee benefits. Once you know your budget, consider what benefits are required on a federal, state, and local level for your business. Some required benefits may include:
Unemployment taxes and insurance
Time off for voting, jury duty, and active military service
Compliance with Family and Medical Leave Act (FMLA)
After factoring in the costs of required benefits, you can determine what elective benefits you would like to offer. Know that these benefits are often what keeps an employer competitive, especially in a hot job market. Additional benefits can include:
Paid vacation and/or holidays
Disability insurance (required for some states)
Performing competitive analysis to see what other companies in your industry are offering their employees is a good practice to help you understand what benefits to offer.
7. Implement the right tools for your growth strategy.
The number of apps, products, and SaaS solutions available is growing exponentially. Identify and use those tools that can help you optimize your business.
Thanks to the ever-decreasing cost of technology, even small businesses have all the tools they need at their fingertips (for instance, a free-forever, all-in-one CRM). But choosing the right ones can be challenging. According to Manvi Agarwal of SocialPilot, there are a few things you should consider when deciding which tool is the ‘right one’:
Zero in on the processes you want to use each tool for.
See how each one of those tools can make that process easier or more efficient.
Choose one that performs a very specific task, even if it might be tempting to go for an all-in-one tool.
Compare how much value the tool is providing vs. the amount it will cost you.
Ensure the tool is scalable – that it grows along with your business and can meet your business’s changing needs.
If you haven’t implemented a stack of tools to streamline your business processes, using a CRM is a great place to start. HubSpot CRM is the perfect foundation for an effective growth strategy.
The most successful businesses center everything they do around their customers, cultivate a sense of trust, and become experts in their space. When a business is able to combine these three things, they’re able to deeply understand their target audience, promote customer loyalty, and provide a solution to their challenge that they can’t get anywhere else.
The following steps will help you ensure you’re doing what you can to ensure your business is successful.
1. Focus on the customer experience.
In 2013, Walker reported that the customer experience (CX) was poised to become the key differentiator in 2020, and it’s safe to say their prediction was correct. Customer service has become more impactful than the price of the product and the product itself.
Customer experience is defined as the impression you leave with your customer. And this impacts their perception of your brand across each stage and touchpoint of the customer journey.
Customers want and expect a great experience from beginning to end, and they’re willing to pay a premium for it, 73% list it as an important factor in any purchase decision, and 65% say it’s more influential than amazing advertising.
Are you ready to provide that experience? Are you over-delivering on your CX? To run a successful business, you should be.
2. Remember to listen.
People are talking about you and your brand whether you ask them to or not. Are you listening and considering what they’re saying?
You might use traditional methods like calling or emailing your customers. You may also use the process of social listening or conduct feedback surveys, such as net promoter score (NPS), to gather data on customer sentiment. Listen to the market and your customers. Adapt and be flexible, but don’t waver on your core values, beliefs, and objectives. Here’s a powerful example of a CEO who listened to feedback and applied to grow his business.
“As the founder of an indie startup, I’ve come to embrace a few core values,” says Eugene Woo, CEO of Venngage. “This includes realizing our mission over a long period of time instead of a quick exit, creating value for our customers by helping them solve real problems, being responsible for our own financial sustainability, scaling at our own pace and doing the right thing over ‘it’s just business.’ This philosophy has guided every aspect of my decision-making process as I’ve made Venngage into an independent, growing and profitable business over the past four years.”
3. Become a better leader.
Before anything else, develop the leadership qualities necessary to build your business’s long-term vision. Great leaders exhibit integrity, accountability, empathy, humility, vision, influence, and organizational direction to drive ideas to completion.
Even as a new business owner with no other employees, you are responsible for leading your business to success. As you (hopefully) grow and others come on board, that becomes increasingly important.
Do you have the necessary skill set of a leader? If not, you can start right now.
4. Cultivate trust.
The very foundation of your business is built on trust with your customers. 76% of consumers pay attention to advertising from brands they’ve trusted for a long time. To develop that trust, make sure your business goes above and beyond their minimum expectations. That means build a loyal community and ensure your product does exactly what you say it does.
5. Spread your message.
It’s all about getting the right message to the right people at the right time.
And in 2020, that means embracing the digital revolution in both your communication and marketing. Where are your customers? Online. How do they prefer communicating and engaging with businesses and others? Digitally.
Here are the most common methods for communicating with potential customers:
It’s more important than ever to be active in omnichannel marketing if you want to attract prospects and keep customers happy.
You need to integrate the various channels used by modern consumers into one seamless experience.
They want to browse, connect, engage, purchase, communicate, and advocate on their terms and in their preferred ways. And if you don’t provide that for them, they’ll find another brand that will.
6. Build your platform.
Successful businesses looking to share their message to their audience usually start by building a following on one platform at a time.
Yes, we recommend using channels such as Facebook, email, digital ads, and search engines to attract new customers, however, these are all what we call managed and paid media. Strong businesses also focus their energy on a primary platform that they own.
A new company’s branding, design, tone, and personality all need to be aligned across every marketing channel and point to a website. Additionally, having a website is beneficial because you own the channel. That means you can promote your content on it anytime you want without dealing with algorithms, paying for ads, or competing for space on the front page. High-quality, valuable content promoted on your website drives traffic and leads to you.
Just make sure that content is solving an existing problem for the customer. “One way to validate that people are looking for solutions to their ‘problems’ is through keyword research,” says Nathan Gotch of Gotch SEO. “You can find the exact keywords your prospective customers are using with tools like UberSuggest or the Google Keyword Planner. You then need to create content around the keywords you find.”
But it doesn’t stop there. “Content is also a valuable sales tool,” says Valerie Turgeon of Brandpoint. “While a strong sales team is essential for closing the deal, buyers are more likely to self-educate and engage with digital content before conversing with sales. A content strategy will help guide your content creation and distribution efforts to get in front of buyers first and help capture leads for your sales team.”
Furthermore, having an effective content marketing strategy is one of the best ways to stand out in today’s crowded online marketplace, according to marketing specialist Isaac Justesen of Constant Content. “But consistently creating high-quality content isn’t easy,” he says. “That’s why many successful businesses outsource content creation instead.”
7. Refine your sales process.
Perfect your sales process and scale your efforts with the right team and software to get more done with less. Instead of disparate platforms, spreadsheets, and email tools, condense your sales process into one distinct CRM and sales platform.
The right tools make you better able to meet and exceed customer expectations. For example, research conducted by SuperOffice indicates that 80% of people expect a response from a company within an hour.
To meet these expectations, give your digital visitors the ability to get in touch with you within seconds by implementing a callback solution like CallPage. This tool, implemented on your web page, encourages an immediate conversation and connects a potential client with a consultant in 28 seconds, having a direct, positive influence on conversion rate and sales results. And live chat software can help address the need for an immediate response.
8. Take notes.
Keep a detailed list of everything you do, and break it all down into simple steps. What tasks and activities can you outsource or delegate without sacrificing quality?
This will allow you to focus on the 20% of activities that deliver 80% of your results, as explained by the Pareto Principle. “Focus on workflows, not work,” suggests Gal Dubinski of Poptin. “The moment your business is based on repeatable pattern activities, you’ll have more time for growth.”
9. Get out of the office.
Almost everything we do can be done online, so it’s tempting to just hide out behind your computer screen. But don’t forget to get out of the office from time to time. Engaging in personal, face-to-face communication, attending events, and networking are all critical parts of business success.
Entrepreneurs are the only people who will work 80 hours a week to avoid working 40 hours a week. –Lori Greiner
Starting a Business is Easy.
But running a successful one takes time, effort, and commitment. Take the time to study the businesses that keep people at the forefront, cultivate a reputation of trustworthiness, build credibility and expertise in their industry. These are the best teachers, even if they’ve made a few missteps along the way. Take what you’ve learned here and turn it into action with our business plan template. You’ll be on your way to starting and maintaining a successful business that will delight your customers and make you money.
Read more: blog.hubspot.com