One of the most baffling paradoxes about small business owners is their tendency to continuously make the same mistakes, despite all their hard work and passion. Even the most motivated and financially-prepared business owners can unknowingly drive their businesses to failure. Fortunately, an increasing amount of new business owners becoming more aware of these mistakes, thanks in no small part to the Internet. Before starting or growing a business, it is now recommended to study the seemingly harmless habits of failed business owners in order to avoid the same fate.
After all, if there’s one characteristic that is shared by virtually every failed business owner, it’s that they had no idea that what they were doing would lead them to where they are today. Here are three of the most common reasons so many small businesses fail:
1. Not Capitalizing On Momentum
Let’s say you own a restaurant and you’ve just finished a very strong busy season. A popular local publication has given you a fabulous review, and your social media following has skyrocketed. So, what do you do next? Owners of failed restaurants might have taken a vacation and closed their businesses until they returned. Or, they might have simply taken it easy as soon as business slowed down, believing they deserved a break from the chaos of the last few weeks. In most cases, both choices would be a big mistake. Any successful small business owners knows that when your business has momentum on its side (especially good press), you can’t let it slip away.
While there might be less foot traffic or reservations, there is still plenty you can do during slow periods to increase business. You could use that review to ramp up your marketing efforts, experiment with changes to the menu, give your website a makeover or renovate your physical appearance. For many businesses, this is the perfect time to pursue a small business loan. The funds would cover your new initiative while supplying a cushion to meet your overhead costs. And you wouldn’t have to dig into your savings to pay rent and make payroll. If you’re concerned about making repayments when revenue is fluctuating, look into help from companies like United Capital Source. Certain working capital loans can be paid back as sales volume increases, so you likely wouldn’t have to make substantial payments until your aforementioned initiative is in full-swing.
2. Being Unrealistic About Costs
Being realistic about costs usually means expecting to spend significantly more money than your initial calculations say. You have to anticipate increases in labor costs, vendor costs, insurance, and advertising. Restaurant owners are particularly prone to this mistake. That new space for their second location might be discovered to require more than $60,000 in repairs. And when costs surpass expectations, you might have to offset them by raising prices for certain menu items, which could derail an integral element of your business plan.
At UCS, we’ve worked with countless restaurant owners who found themselves in this exact situation. You might not be able to calculate unexpected costs, but certain types of businesses can pretty much assume that they’re going to need additional business funding for certain initiatives, like opening a second location. Here’s something your bank won’t tell you: It’s completely normal to not have enough of your own money to cover these expenses. We even offer franchise business loans that are specifically designed to cover the mandatory fees that come with franchises. For example, there is the “franchise fee,” which typically amounts to tens of thousands of dollars on its own. The business owner might be able to cover that fee were it not for the mandatory income deductions that begin the day the business opens its doors.
3. Being Unrealistic About Daily Tasks
Just like expenses, a successful business owner must be realistic about how he or she is actually going to spend each work day. Countless people have started businesses to “do what they love” only to find themselves buried in other responsibilities related to equipment, bookkeeping, or business partnerships. The same concept applies to growth. You might want to develop new products or launch a major marketing campaign but by the time your other responsibilities are out of the way, you are too tired to think about doing anything else. Having to neglect your dreams can drain your motivation along with the personal connection you have with your business.
Being realistic about your day-to-day tasks makes you realize that time is truly an asset. It doesn’t just naturally appear at your disposal. This is why myriad UCS clients have taken out small business loans solely to obtain the time they need to concentrate on growth. The funds cover regular business expenses (bills, payroll, etc) because the growth initiative is going to interfere with revenue-generating activities, like sales. UCS even offers numerous business funding programs, like a merchant cash advance, that let you pay off the majority of the debt when sales eventually recover.
What’s The Central Theme Here?
If there was one central theme that tied all three of these things together, it would be patience. You are more likely to unknowingly sink your business or have difficulty obtaining the right small business loan if you lack patience. A patient business owner never loses sight of long-term goals and accepts that reality isn’t always what you originally had in mind. You have to put your “wants” on hold and focus only on your “needs,” even if you don’t know how long it will be until the situation is reversed.