Avoiding Membership In The SBA’s “5 Year Failure Small Business Club”
There are many reasons that the U.S. Small Business Administration consistently reports a small business failure rate of well over 50% within the first five years of doing business. Although the SBA gives very broad reasons behind organisations’ failures, looking into the specific reasons, there is a lot more to the equation than variables such as lack of capital, low sales numbers, higher competitive landscape and the usual, generic suspects.
Here are just a few reasons businesses and up in that five-year failure category, and what you can do to avoid ending up there:
1. Lack of “Google Recession Proofing” – The economy is always better on the first page of Google, however, because learning search engine optimization takes a lot of work, a lot of writing and patience, many small business owners get into a state of denial as to the positive effects of ranking highly in the search engines (particularly Google) for a myriad of reasons.
We have all seen a terrible recession over the past few years that seemingly lingers on and on. Though the lingering may be universal, the impact of the recession on the highly ranking company’s bottom line compared to that on the second page is astronomical.
2. “The Entrepreneurial Sprint” – Failure to see that entrepreneurship is a sprint rather than a marathon for the first few years of business. There needs to be a sense of urgency to tackle any and all tasks, before the entrepreneur finds himself or herself falling behind in lieu of forging forward. Business is about growth.
Until a small business is “corporate” a sense of urgency starts with the owner, or that owner ends in up the unemployment line. A work life balance is earned by the entrepreneur, not deserved.
3. Recruit the best, though this is easier said than done. Many businesses, upon recruiting the first few employees, have a preconceived idea about the proper background and exact skill set of their ideal employee. These might range from a precise college education to particular management experience, however just because an employee looks good on paper does not mean that they will drive revenue.
I have had absolutely no luck recruiting Ivy League graduates, for instance. At the outset I thought recruiting these individuals was prestigious. It turned out the hires were just a drain on my bank account. My assumption that Ivy League intelligence means high ROI might in your case translate to the assumption that your first salesperson can only come from X or Y industry. There is no formula of how to recruit the most competent individuals, and simply understanding that there is no formula is the first step to staffing competitive employees who are going to allow you to take chunks of market share within your respective industry.
Even though the SBA gave 10 reasons that businesses fail the first two years, there are deeper reasonings than lack of capital and other logistical generalities. Going by measurements like this will do nothing short of putting you in that not so prestigious “5 Year Failure Small Business Category.”