Why Small Businesses Fail?

By Bala S. — Get free updates of new posts by following me on Twitter

Late night dinners… mostly junk. Lack of sleep. Getting up late in the morning. Working hard. really hard. Busy all day, not enough time for family. Not taking care of your health. Stress — at work and at home. Your business has become your life…But not enough customers who make the cash registers ring…

Sounds familiar. A typical day / week / month in the life of an entrepreneur who is not directly in the tech-sector — dedicated people running
corner-shops, cafes, restaurants, cleaning services, reprographics & print shops — a long list that is too big for this paragraph. Small businesses who are less than 1 — 2 years old usually find themselves in a very tight spot from the word go.

With all good intentions to start a business, people overlook the fact that the idea / product / service they are trying to sell is not positioned correctly.

There’s a lot of passion, the urge to make it big, the aim to stand out from the rest, the need to make a name in the community … This usually is the typical starting lineup of reasons to get on to the business bandwagon.

Many people would generally have a good idea of what they want to do in a business — most would have had some kind of experience working in a similar field, seen how other businesses in this sector have flourished, know a few friends, or family members who have done this before. This is where the idea sets into their minds to start a business.

If they can do it, I can do it better and probably make more money.

But how many of us know someone who has tried his hand at running their own business and fallen flat. No disrespect, but this is true scenario, when a small business fails its not just the business owner who suffers, it takes its toll on the family too.

Relationships suffer….

I have known friends who all were in well paying jobs who wanted to start their business — the bug is very potent, you know. They left the jobs, gathered the savings, got a loan from the bank (the ones who actually got a loan during the recession were lucky), remortgaged the home — anything that could help them see the idea take shape.

They were convinced that this was their big ticket.

The thinking that it worked for someone and will work for me is quite a dangerous idea to play with. But in small communities you go with whatever information or role models you have at hand — whichever comes first does make an impact to your decision making process.

Once you are convinced, its very hard for even very close family members to change your mind. Reluctantly they fall in line and hope that it works for you. You are also hoping that this will work.

Hope & business don’t mix at all. Period.

What most people do in small business is not what they learnt in school. A lot of it is hunch, a good idea that they think will click, or are mostly copying the business models of other successful (or seemingly successful) businesses that they know or have heard of.

Most of us have not had the opportunity to go to a business school. So a lot of stuff that influences the decision making process is down to experience (or the lack of), what friends have done or said before or what you have learnt on a job — a skill or business model that you think can be converted to a business.

Also there is an urgency in getting on with it. To start a business and get things moving because you want to see results quickly. The initiation period — from having an idea, to the start of business, is usually very short.

To get the money needed to start the business — is what turns out to be the most important factor at the start of a small business. This is also the most incorrect of all decisions taken at the start.

I have thought about this scenario many times over and always end up with one major barrier. Why does the tech sector have so many validation points — lean startup, lean canvas, javelin board, lean discovery, traction channels, hooks, growth hacking, user experience….but the typical non-tech startup owner has probably never heard of them or have not used them.

I then ask a question to myself. Do they at least know these tools exist and they can make use of them with little or no upfront costs.

Before they move any further with their idea — do they know they have to position it correctly. Or else it will fail.

This writeup was not meant to teach product positioning, but a struggle within me to find out how we can stop businesses from failing. How all the good tools and steps that every new tech startup uses everyday to reach that elusive IPO can be used by a small business which has never heard of these terms before.

The tech startups have got the first few steps right. Can this be replicated / followed in business sectors where non-tech small businesses usually reside?

I write for startups, people who want to try out an idea and for everyone who puts validation & customer experience at the heart of their business. If you liked this post, you may follow me on twitter — @leanux_bala