The rate of business failure is too high!
In 2021, 1,843 companies were founded every day. There were 5.82 million small businesses and 35,600 medium businesses in the UK. Overall, there are a lot of businesses out there!
However, did you know that 20% of businesses don’t make it past the first year? And 60% don’t make it past the first 3 years?
Business success is, unfortunately, far from guaranteed.
Understanding the strategic imperatives for growing a small business, and business growth in general, is vital to giving you the best chance of your business achieving it’s potential.
Here we run through how to grow a successful business, including some business growth advice.
Understanding why businesses fail
It’s important to understand why businesses fail in order to ensure the same mistakes are not made time and time again.
However, all too often SME business owners learn through trial and error rather than learning from others.
Frequently, they are great technicians and therefore believe they know what they need to do to run a business in their chosen industry. But running a business is different to knowing how to do a job.
They haven’t taken the time to explore the strategic imperatives for growing a small business, beyond the technical capabilities required.
We sometimes even see a mindset, where seeking support on how to run and grow a business, is a ‘cost’. When in fact, seeking this type of support is an investment in their own personal development and in their business’ future.
The UK figures of business failure versus the testimonies of our clients, show the folly of that mindset.
As a business coach, we are determined to see the rates of business failure change, which means we need to understand the reasons for failure better.
The top five reasons why businesses fail in the UK are:
- Running out of money/cash flow issues
- No market need – or certainly not as significant as first thought!
- Stronger and better competitors, whether that be in marketing, service or product
- Flawed business model
- Legal or regulatory challenges or changes.
How many of you have experienced these challenges? Any one of these could bring a company to the brink.
So, what are the strategic imperatives for growing a small business?
What makes a successful business?
Very often it’s a combination of factors coming together to create a company working in harmony but there are a few common aspects across all successful businesses. We take a brief look at what we believe to be the top 4 strategic imperatives for any business to grow and succeed.
1. A strong customer focus
Before you start with any business idea or expansion, it is important to make sure the service/product provides and addresses real-life needs, with a strong level of demand.
This can be a demand that wishes to overcome a pain point for a specific audience, or a demand that provides a gain for them.
Market research will be a core element of this and no assumptions about motivations, behaviours and decision-making criteria should be made.
Without a deep understanding and empathy for your customers at the centre of your business, you will be doomed to fail.
Whether it’s the failure of the product to sell or a failure of the brand to resonate.
In the latter case, even if you have the superior product, but your service and brand itself aren’t customer-centric, all it needs is a competitor more focused on this area and you’ll see your market share fall away.
2. Clarity of direction and purpose
Once you have your service or product that has a strong USP, you will need clear planning, commitment, and regular activity that are aligned to the specific business goals you have created.
There is no quick fix on how to grow a business quickly, but having a clear direction and purpose will help grow your small business, and allow it to get through the first 3 vital years.
This will help you priortise, make decisions and focus your resources – what is essential, what is a nice to have, where to invest and when to be cautious.
We’ve provided guidance on what a good business growth plan looks like in a previous blog.
3. Consistency of approach
We find that many companies have a ‘magpie mindset’, which means constantly chasing that elusive magic solution.
The truth, in SMEs, is that if you have a good set of solutions for known customer needs, you can make success happen by applying the basics of business consistently and well. The basics are as follows:
- Pick your niche – know your market and focus on it
- Create effective marketing – targeting your audience with the right messages, at the right time and on the right platform
- Sales – an optimised and consistent sales approach
- Operational delivery – seeking efficiency and effectiveness
- Financial – understanding of your current cash flow, future projections, margins and profit levels by product/service
- Team systems – managing performance and teams
Consistently is a strategic imperative for growing a small business. Apply these consistently, and you can go far!
4. A focused and strategic action plan for the driving metrics
Understanding the profit drivers in your business is important, and having a clear understanding of cashflow is vital.
Customer volume, turnover, and profit are all RESULTS. Your selection of strategy and the application of the right approaches to the driving KPIs is what will change them.
SME owners need to know the results but where they can add most value to the business, is to focus on the strategic direction of the business itself i.e. the strategies needed to change the results.
Moving beyond functioning well and consistently, to taking your business to the next level – one of excellence, scale and rapid growth – is a particularly difficult hurdle to get over.
A business and business owner trying to do this on their own can often find themselves plateauing – in terms of performance and sometimes in their own knowledge of the strategies to accelerate business growth.
This is where a business coach can step in to increase the knowledge and expertise of business owners, therefore closing the gap between their potential and real-world performance.
