Once entrepreneurs successfully surmount the difficult process of building startup capital and writing out a business plan, many believe that their company has the straightaway to success. If a roadblock appears, they seem to think it came out of nowhere, when actually, if they had done a little more planning, the problem could have been avoided.
“No one says ‘I’m going to start a business and mess it up,’ †says Marcia Pledger, author of My Biggest Mistake and How I Fixed It: Lessons from the Entrepreneurial Front Lines (Orange Frazer Press Inc.; $19.95) “But you can go out of business as quickly as you went into business if you don’t take care of the basics.â€
It’s hard enough to stay in business without the U.S.’s sluggish economy making it more difficult. Consider that in 2008 the U.S. government wrote off a record $2.1 billion from small business loan defaults, according to an Associated Press investigation.
Those remaining in or choosing to start businesses must be ever more diligent at avoiding preventable setbacks. BlackEnterprise.com diagnoses four common ailments in small business growth and our experts provide prescriptions for remedies to help them recover.
Ailment: The competition always out-prices your merchandise.
Prognosis: The targeted clientele is too broad.
Prescription: Develop a well-established product or service, market to a niche customer, and communicate to that customer the unique qualities of your product or service. Small business owners can’t compete on price points with large, national brands, but they can compete when it relates to value, says Jerome Edmondson, president of the Entrepreneur Development Network, a small business incubator. Convince your customers that even though your prices might be higher, your product or service provides a better benefit and thus a better bargain.
Ailment: Your company is expanding too quickly.
Prognosis: The owner lacks knowledge about how to grow and profit simultaneously.
Prescription: Now that you’ve created a well-established brand, do your homework before you try to take it to
the next level. Take time to understand the industry, your product, and your customer. Pledger recalls a story about a pretzel company owner who, in an effort to expand her business, took a large order from a grocery store chain but was not prepared for the challenge. Her distributor ran out of packaging, she did not know how she would deliver the product to the store, and she lost money when the pretzels didn’t sell.“She should have done some research to find out what the grocery industry entails,†says Pledger. If the owner had sought advice from a larger company that sold a similar product, she might have learned that the profit margin for her specialty product was very thin.
Ailment: You company lacks customers.
Prognosis: The company is inconsistent with business practices.
Prescription: A business owner should be selling, delivering on what the company sold, and developing the product all at the same time, Pledger says. If a business spends all of its resources on one client then it is not only neglecting potential clients, but also the day-to-day responsibilities that help build their brand.
A business must consistently work on developing every area of the business including accounting, marketing, and employee relations so that it can maintain the quality of
its products or services. One way to accomplish that is to meet or exceed the expectations of returning customers. Lowering the standards of a product or service after the product launch is one way to disappoint returning customers and keep them from coming back.Ailment: Contracts and critical assignments are not fulfilled.
Prognosis: The owner is trying to do too much on his own.
Prescription: Hire expert employees and learn to say no to contracts or business propositions that do not match your company’s mission. Small business owners sometimes don’t trust their employees enough because they think no one knows better than they do what is best for their business. “You can not grow and do it all [on your own],†Pledger says.
Also, don’t try to cut corners when it comes to professional help, Pledger says. The difference between a bookkeeper and a certified public accountant will make a world of difference come tax time. Hire competent people that understand your industry. Once you put the right people in place you have to trust them and know when to let them do their jobs.
Also, take time off and get away from your business once in a while. Otherwise you will begin to lose your enthusiasm, which will affect your customers and employees. “Entrepreneurs very rarely say no because they are always chasing the next dollar,†says Edmondson. “Sometimes the next dollar can be [found by] getting rest and relaxation.â€
Resources
Small Business Administration — Small Business Training Network
U.S. Chamber of Commerce — Small Business Library
SCORE -Counselors to America’s Small Business
Association for Small Business and Entrepreneurship