Top 3 Reasons Most Small Businesses Fail – And How To Avoid Them

As a small business owner, you’ll face lots of challenges. From managing finances to training new team members, there is always something to do. But, that doesn’t mean you’re not going to make it as a business owner. By following these tips provided by Mythos Group, you’ll avoid pitfalls that many small business owners fall into.

Difficulty Managing Finances

One of the biggest challenges businesses face is managing finances. Even those with a strong understanding of financial principles will struggle with managing their business finances. 

According to the Federal Bank of Chicago, successful businesses have the following characteristics.

• Knowledge and experience with credit. Business owners should understand how credit lines work and how to use them to their business advantage. For example, a jewelry business could use a line of credit to buy supplies. They may not have the cash for the supplies at the time of purchase, but once the jewelry they make with the supplies sells, they will be able to pay off the credit and end up ahead.
• High levels of unused credit balance. Typically, businesses who do well financially have high levels of unused credit balance. While it’s important to know when to use credit, it’s also good to keep a large portion of your credit balance unused. This helps your credit score, which will increase your odds of gaining investments and loans. It also allows you to have that credit in your back pocket for urgent expenses that pop up.
• Budget management and monitoring. Businesses who are successful understand how to monitor and manage their budget. Doing so allows them to see their revenue and expenses, understand their profits, and make decisions on things like inventory, pricing, and buying assets. 
• Cash set aside for payroll. Businesses should also set aside cash for payroll. In order to be effective at budgeting, you should have enough cash in the bank to pay all of your staff. Your staff should never have to wait past pay day to receive their paycheck. 

To get better at managing your businesses finances, follow these tips.

• Create a budget. You should create a budget that includes your average expenses, including inventory, payroll, and rent. After adding your revenue to the budget, you’ll be able to see your average cash flow and make better financial decisions. 
• Use a business credit card. Having a dedicated business credit card will allow you to monitor your business spending more closely and have a more accurate financial projection.
• Invest in financial management software. Using financial management software makes it easier to track your profits.
• When in doubt, get help. Once your business starts growing, managing your finances will be too big a task for one person. It’s wise to hire a small financial management team, including an accountant and a financial analyst. 

Improper Training Of Team Members

Another pitfall that many small business owners fall into is improper training of team members. If you hire new people and don’t train them on their responsibilities, company policies, and company goals, they won’t be able to perform their duties effectively. Taking the time to properly train employees will increase employee satisfaction and reduce employee turnover rates.

By following these tips, you’ll be able to effectively train your team members.

• Train technical skills. Train your employees on the technical skills they’ll need to know. Educate them on your processes and any software or tools they need to use. For example, if you run a brick and mortar retail business, you’ll need to thoroughly train your employees on the POS system and inventory management.

• Train soft skills. While it’s often forgotten about in traditional onboarding programs, soft skills are just as important as technical skills. We recommend educating your employees on your values. By teaching them soft skills, they’ll be more valuable members of your team, be more loyal to the company, and have better interactions with customers. For example, if one of your company’s values is empathy, you should show your new employees how to be empathetic towards their team members and customers during training.

• Work with other employees. Another important way to train new team members is to work with other employees. You could have a new member shadow a more experienced team member. This will show them a different way of doing things, that is just as effective, so they can choose what process suits them best. It will also give them an opportunity to feel more a part of the team and make a connection with someone who they will be working closely with.

Setting Unrealistic Marketing Expectations

Another mistake I’ve seen small business owners make is setting unrealistic marketing expectations. Some entrepreneurs expect marketing to solve all of their problems. While marketing can generate new leads, engage with customers, and increase revenue, it doesn’t happen overnight. Quality marketing content takes time to create. It also takes time to find the right consumers. 

Follow these steps to use marketing to your advantage.

• Focus on quality over quantity. It may be tempting to create a lot of content and start posting it just to have something out there, but that isn’t the best strategy. It’s about high quality content, not the amount of content. Studies have shown that the time of day of posting doesn’t matter if the content posted provides value to the target audience. Create high-quality, valuable pieces of content that educate, inspire, and entertain your target audience.
• Define KPIs. KPIs, or Key Performance Indicators, tell you how your marketing is performing. KPIs include website traffic, lead generation, and social media engagement. By defining your KPIs, you’ll understand the goal of your marketing and work towards meeting that goal.
• Give it time. Some may expect marketing to work its magic overnight. Unfortunately, it doesn’t work that way. Marketing takes trial and error to find the right content for your target audience. Be flexible, and adapt your content until it hits the mark.

Avoid These Mistakes

You can avoid these business mistakes and more by consulting with Mythos Group. Mythos Group consultants will advise you on how to run your business effectively. Contact Mythos Group today!