1. Committing to high overheads based on potential rather than actual business.
Shop or office leases, car leases, computer equipment purchases, business cards, glossy flyers, huge Yellow Pages’ ads, staff salaries, letterheads, press advertising - they all add up.
Especially for a new business that will take some time to establish.
All businesses do.
If a healthy, established small business is only earning in the vicinity of 20% net profit on turnover, how can such expenses be afforded? Especially without steady income coming in.
They can’t without borrowing usually - another business expense in terms of interest charges - and such ventures are already building momentum against their efforts.
Momentum is everything - in business and in life.
Businesses must grow organically if they are to survive. Expenditure must work as a proportion of income. This may lack ‘sizzle’ and may not be ‘glamorous’ but there’s nothing cool about bankruptcy.
2. Not offering anything new in the way of a product or service.
Consumer buying patterns are based on certain recurrent factors: location (gas stations, 7-11s); price (Wal-Mart); familiarity/location (doctor/accountant); ease of purchase (TV infomercials); financing attractiveness (cars); brand/product/image loyalty (Nike).
Obviously there are overlaps in each of these areas but for your new business, there must be one (or more) of the above reasons working for you: e.g. yours is the only/coolest/fastest internet café in the area.
In short, there must be a very clear, tangible reason why a consumer or client would buy your product or service and not someone else’s.
Rather than thinking, ‘if I build it, they will come’, think, ‘if I build it intelligently and low-cost/no-cost guerrilla market the hell out of it, they will come.’ Think big yes! Think dumb no!
Even with differentiation, consumers need some time to discover the ‘killer attribute’ through intense [guerrilla] marketing action.
Potential buyers do not immediately jump at something new. It takes time for the message to sink in and critical mass to build up.
When it does though, it is pretty cool and makes the sacrifices and hard work worthwhile.
3. Being Impatient.
Many small business newbies thus have this naïve, aforementioned ‘I will build it and they will come’ mentality.
These newbies - which we all were once - are then profoundly disappointed when ‘they’ inevitably don’t come. Or at least not in sufficient numbers.
The only kinds of business where this instant-success dynamic might happen are new retail ventures in incredibly busy locations. The bad news is that such ventures usually require a lot of start-up capital.
Building a business takes time. In fact, smart operators start up their new small business before leaving their other job.
This can be physically demanding BUT makes the economic transition a much easier one.
Be patient with your new business but keep learning and modifying your operation - even the name of your business/product/service may need considerable fine-tuning.
4. Lack of marketing oomph.
In today’s ultra-cluttered marketing world, you have to work hard to get your message through. Across countless small business ventures, I have always found small, local newspapers (not the big, expensive city-wide ones) marvellously cost effective.
Here’s something else that the advertising industry - where I used to work as a Creative Director - doesn’t want you to find out: classifieds in those same papers perform much better than more expensive, graphics-intensive display ads!
Embracing the ‘counter-intuitive’ reality of the world is vitally important if a small business is going to survive and succeed.
Depending on your business, I can’t recommend this marketing option highly enough among the many you will use. It’s cheap, has impact and real flexibility - change your ad every week if need be e.g. new specials, new offers. Test and track. Test and track.
Big companies can only dream of this kind of flexibility as they’re addicted to large, over-produced and massively over-priced glossy campaigns that ‘brand-build’ i.e. squander millions pointlessly.
Simply being ‘open for business’ has very little marketing oomph. You must work and guerrilla market tirelessly in the early phase of your small business’s life.
Later, more strategic options will be effective in addition to word-of-mouth [endorsement marketing], your operation’s most valuable marketing asset.
5. Lack of market research.
Why set up a new small business if there are already dozens of other similar operations in your area that have been going successfully for years.
If you have a small business idea of merit, ask your prospects their specific problems, frustrations, fears and needs and frame all marketing in their language addressing them with specific solutions to their specific problems - not the language of a university marketing textbook.
It’s always fascinating to hear feedback - and you can adjust your small business marketing plans accordingly, especially if you remove your own assumptions about your prospects from the equation.
Research costs almost nothing but your time.
A bankrupt small business costs much, much more.
Research, research, research!