80% of new businesses in the UK fail in the first year alone
It’s not rocket science to work out that at surface level the primary reason businesses fail is they simply run out of cash. I could mention other well recognised nails in a business’s coffin such as inadequate planning, poor location, no relationship with the customer, cash flow problems, insufficient marketing, etc etc
If you are thinking about going into business there are some steps that you can take to make sure you actually go the distance or at least avoid being left with a massive deficit if you do fail (sorry but we need to be realistic here).
My advice to any new entrepreneur is simple
- go small scale first
- don’t’ spend too much
- test it
- adapt and modify
- give it time
Do this and you may be one of the small numbers of new businesses that last more than 18 months.
Entrepreneurs need to find a way to figure out their ‘secret sauce’
But, without spending tons of money. Too often we are of the mindset “If I build it, they will come”. They won’t. Secondly, we all believe, that we will provide “better customer service and greater value” than the competition and that is all it takes to be a success. But, so does everyone else.
A perfect example of ‘testing the market’
In Tony Hsieh’s book, ‘Delivering Happiness’, he tells the story back in the late 90’s when he and his co-founders weren’t sure whether people would actually order shoes over the internet. So they ran a quick test. They set up a website with images of shoes taken from different manufacturers’ websites, added some ‘buy now’ buttons and watched to see what happened.
An order came through! One of them ran to the local shoe shop, bought the requested shoes at full retail price, and then scurried home to ship them out. Yes they lost money on every pair of shoes shipped at first, but they very quickly ascertained that they had a potentially viable business idea.
If your start-up costs are small you can also allow time for the business to grow
Take my Pilates classes for example. As long as I covered the cost of the hall hire the only other predominant cost was my time. This meant that low class numbers at the start wasn’t going to break me financially and meant I could give the business time to grow. Three years on and I have 7 classes and between 75 to 100 men and women doing Pilates with me each week.
Most successful small businesses grow at a slow and steady pace.