10 Reasons To Not Fail In Business & How To Survive In 2022
Have you ever considered starting your own business? Or do you have a your own business?
You’re not alone. According to the latest U.S. Small Business Administration data, there are 32.5 million small businesses in the United States. Undoubtedly, though, with millions of businesses in the country, some are bound to fail.
With my experiences of small businesses, I have seen it all. But I believe that our failures strengthens our ability to overcome obstacles in the future.
According to the latest information on small business failure rate published by the U.S. Bureau of Labor Statistics: Roughly 20% of small businesses fail within the first year. 21.6% of small businesses founded in March 2017 were closed by March 2018. Roughly 33% of small businesses fail within two years.
The Small Business Administration (SBA) defines a small business as a firm that has fewer than 500 employees. This means that many highly valued startups in the US fit within this definition of small businesses.
The definition of a small business varies across the world. For comparison, in the European Union, any business that has fewer than 50 employees is considered a small business. In Australia, companies with fewer than 15 employees are considered small businesses. (Oberlo)
The Growth of Small Business
This timeline measures entrepreneurialism in the United States by showing the number of businesses that were less than one year old and still in their start-up phase, from March 1994 to March 2020. In March 2020, there were 804,398 businesses that were less than 1 year old, an increase on the March 2019 figure of 770,609. (Statista.com)
20 Reasons Why Startups Fail
This statistic does not mean that your business will fail but rather look at it in a positive way. By knowing what could go wrong, you can create a better business strategy that will overcome potential risks that might come your way.
Lending Tree has 20 reasons why startups fail generally. But there is another reason they have failed to mention.
The biggest reason for failure is a part of why we start our business.
Most people start a business because they are good at something, whether you are a plumber, technology, or arts and crafts.
Or you have a job and decide, you know what, I am doing all the 'work' and so I can run my own business.
But in reality, all you are doing is exchanging one job for another.
10 Ways How To Survive Your Small Business
In my experiences with small businesses, there are always ways to rally from a failure. I believe that our failures strengthen our ability to overcome obstacles in the future.
1. Have goals and a business plan
If you don't know where you are going, how are you going to get there?
Do you want to know what caused the majority of businesses to fail in 2022? I’ll tell you. Lack of goals and a business plan! A survey was carried out by researchers in 2018 and they found that 68% of businesses failed in 2022 because they did not have a goal or plan of action.
When you start out as an entrepreneur, you need to think about your goals. You need to know where you are going and how you want to get there.
If you plan a road trip, you make sure you are on the right roads, and most of the time you have an end of the trip in mind.
Olympic athletes are a great example. Their goal is to get to the Olympics and they have a plan of action of how to get there.
You need a goal and then plan accordingly to achieve your goal. This is your roadmap that you can follow and it will help you to think clearly of the actions you need to take for your business and see the gaps you need to fill.
2. Make sure you have a cash flow
The number one reason businesses fail is that they run out of cash. If you do not have the cash flow to support your business, it will go under. It is important that you make sure you have enough money to sustain your company for at least six months.
To have a successful business, you need to have a cash flow. Unfortunately, you need money to run your business, and the need is there before you make a profit in your business.
You never know when an emergency is going to come up and it's best if you are prepared for it instead of borrowing money from someone else or worse yet having no money at all when an emergency happens!
It takes money to grow your business because it takes time to encourage people to buy your products.
3. Make sure you earn a profit
Pricing your product correctly is priceless!
Profit is the reward for risk. Profit is what makes it all worth it
Profit is also the purpose of business. It's what allows a business to grow and expand, pay its employees, and take care of its customers.
But profit is not just about money in your pocket. We need to define profit a bit more broadly for our purposes here. So let's start with this definition: Profit is the amount of money left over after you pay all your expenses.
The first step in determining your pricing is to make sure you earn a profit. As simple as that sounds, many small businesses don't accomplish this because they don't consider all their costs.
In order to calculate your cost per unit, follow these steps:
List all the fixed and variable expenses it takes to produce your product or deliver your service. Be sure to include all labor (including yours), raw materials, shipping and handling, packaging and any other direct costs associated with producing and delivering your product or service. Don't forget to include indirect costs such as utilities and rent.
Here is a link for a break-even analysis worksheet you can use.
4. Don't spend your money
There are a few reasons why entrepreneurs get into trouble when they have money. It is a rare thing to see, so they tend to make some bad decisions. It is exciting, and it is easy to get caught up in the excitement and start making some new purchases. In addition, when you have money in the bank, it is easy to think that you can spend it as you wish since it will always be there. But this is not true.
The pit business owners tend to fall into is spending their money whenever they want. When the money flows in, it is hard not to start spending. And the same goes when getting a business loan. Money in the bank does not mean money in your pocket. There should not be a quick vacation because you deserve it after working so hard.
Make sure that you are not spending more than you make in your business. If you are spending more, then you need to cut back somewhere. You might need to reinvest back into your business or you might be spending money unnecessarily.
Keep track of where every cent goes and why it is going there. If you don't know, then find out! You will be surprised at where your money is ending up, and if you don't pay attention to it, it can easily slip away from you. Don't be afraid to ask questions if necessary.
This is where a business plan comes in handy.
Remember that your personal finances and business finances are not one and the same; keep them separate at all times, even if you have to use different banks for each account.
5. Hire the right person
The decision to hire the right person is one of the most important ones you’ll make as an entrepreneur. You’re going to be spending a lot of time together, working towards the same goal, and it pays to be picky.
There are many different personalities and skill sets that can make someone great at their job. It’s not always easy to find them all in one person, so it’s important to determine what kind of employee will fit your company culture best.
But there are certain things you should avoid at any cost. I call them “red flags.” Watch out for them when hiring, and you could save a lot of headaches along the way. The following are three red flags to consider when hiring:
1. Candidate doesn't seem enthusiastic about the job
2. Candidate can't give examples of past successes
3. Candidate's personal brand/social media doesn't match your company's values
A good place to start is with a job description for each position. Give it some thought because that will help you decide what type of personality and what skill set you need for the position. Don’t be so eager to hire that you overlook important factors.
If they are going to be working directly with customers, then they better know how to communicate with them in a respectful manner. They should not have an attitude problem, they shouldn’t be rude, and they should not swear (even if your customer does).
Be very careful to hire friends and family. You cannot get rid of family and you will lose friends.
Here are some great tips when deciding to hire somebody.
- Create a list of tasks you want the person to do.
- Create a list of skills you need that person to have.
- Create a list of questions to ask when gathering testimonials.
- When you get the resume, start calling their previous employers. if you are calling another small business, remember that could be a friend of the person you are hiring, so the praise will be great.
- Make sure to ask for what they did not like. Everybody has bad habits but that does not mean they are a bad employee.
- For instance, a smoker goes out every hour or two hours, but what they do with their time at their desk counts more than somebody else at their desk all the time but they are cruising Facebook.
6. Pay your taxes - especially your sales tax.
The most common type of tax that online retailers must collect is sales tax. If you’re selling physical products, you need to pay sales tax on every sale.
However, it doesn’t stop there. First, you need to pay sales tax in the state that you are doing business in. You also need to be aware that per state, you may be liable for sales tax depending on where you are selling your products.
If you have a physical location and are required to charge sales tax in that state, then it's pretty simple to calculate and pay on all sales coming through your site. But if you have no physical location or warehouse in any given state, then determining who pays what can get complicated. Most states require companies only collecting sales taxes in states where they have nexus — this is known as origin-based taxation. Other states require online companies collect based on destination-based regulations — which means paying taxes wherever your customers live instead of where your company does business or ships from.
Depending on your business model and your products, this can get very complex very quickly. The best thing you can do is read up on the topic and get advice from an accountant or other tax expert.
So keep an eye out for what is going on.
7. Pivoting to change strategy - Diversify where & what you sell
The world of business is changing drastically, by 2025, the business world will be very different than it is now.
Pivoting is a change in direction — but it can also mean a change in strategy, product, or target market. For example, you might have started out as an ecommerce company selling T-shirts to young adults, but as your business has evolved, you've discovered that the T-shirt market just isn't big enough for you to make the kind of profits you'd like.
That's when diversification becomes important. You may want to widen your product line to include other apparel items and accessories that appeal to the same group of shoppers. Or you could think about expanding your offerings to include a broader range of customers by creating a new department on your site that appeals to children or older adults.
Pivoting when it comes to products and services can be complicated, with lots of moving parts and variables. But as long as you're vigilant about keeping track of where the digital marketplace is headed and how your competitors are positioning themselves, you should be able to stay ahead of the curve and pivot with confidence.
Pivoting can mean strategy changes like:
- Diversifying where and what you sell.
- Increasing brand visibility on social media platforms.
- Expanding your product catalog.
- Starting your own YouTube channel or podcast series.
8. Follow your gut feeling
Starting a business is a leap of faith. You don't know if the company will be successful or not so you have to trust your gut and make the jump.
On the other hand, you need to follow your gut feeling when it tells you not to do something because you are unsure.
We often ignore our gut feelings. We are taught to move forward, to be strong and never look back. But when it comes down to it, you don't want to make a decision that you will later regret.
Business owners should listen to their gut instinct and if it tells them not to take a risk then they should listen to it.
It takes time to get clear on what matters, and what might just be a distraction in the short term. Give yourself the gift of time to consider all angles. This may include talking something through with a trusted business associate or your mentor and asking for feedback, rather than jumping into something straight away.
Sometimes it’s the little things that make the difference between success and failure in business so consider each decision carefully, particularly those that feel risky or outside your comfort zone – like passing up on an opportunity that doesn’t seem right, or taking on a new client who wants things done differently from how you’ve always worked.
Your intuition can be your greatest tool as an entrepreneur – whether that’s helping you make decisions or giving you the confidence to push your business forward – but only if you trust it.
9. Stop to smell the roses
When was the last time you heard that? Or maybe someone has said it to you recently. If you are like me, this expression has been around almost as long as I can remember.
So, what does stop and smell the roses mean? The expression stop and smell the roses means to take some time to appreciate the little things in life. It’s a way of telling someone it’s okay to slow down and enjoy being alive.
We live in a very busy world. We tend to be busy all day every day. But we have to stop and smell the roses sometimes. We have to appreciate the journey, not just look at the destination. As you go through your day, appreciate it for what it is, don't just rush through it in order to get things done.
Life is a journey, and if you miss the journey you will miss your life.
Let me ask you a simple question: Are you looking after yourself?
This is not a trick question, I promise. And the answer should be yes, but I know that it's not always the case with busy people.
The irony is that taking care of ourselves can seem like just one more thing on our to-do list. But we can't afford to let it get lost in the shuffle. Because when we're stressed out, burned out or simply stuck in a rut and going through the motions, we're not living our lives, are we? We're just existing from one day to the next.
10. Diversify your marketplaces
There is a common expression used to emphasize the importance of not putting all your eggs in one basket. You have probably heard this expression before. It's quite a catchy one and we can all relate to it because it makes sense. If you put all your eggs in one basket and drop it, you'll lose all your eggs. That's why you need to diversify where you sell your products. It's always good to have more than one selling channel, so that if something happens on one place, it doesn't affect your business negatively as much as if everything was in the same place.
Your e-commerce business is no different! You should not rely on only one marketplace or website to generate all of your sales. Having multiple selling channels helps reduce the risk of losing your entire business in case something goes wrong with just one of them. For example, what would happen if Amazon decided to shut down today? Do you think it would impact their loyal customers? Of course it would! And what about sellers? They'd be left without a storefront and without means of income overnight!
What will happen if eBay decides to increase its fees next month? Will they retain their sellers, or will they leave for other platforms that charge less?
On the otherhand, if you do not have a website and only sell on Etsy for instance, the same applies.
If you're worried about making too much work for yourself by adding additional channels, don't be — there are plenty of tools out there to help you manage multiple marketplaces at once.
Shopify is a great online platform to create your store and connect it with all your other marketplaces or if you have a store already, it is easy to migrate to Shopify with the Shopify App, Matrixify.
You can sign up for a store right here: Shopify Online store
Be aware that sometimes the correct path is not always the easy way. That's why being an entrepreneur means taking risks, being persistent, and loving what we do!
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