Small Business Alert: Five Reasons Most Small Businesses Fail

Did you know that in 2007 over 560,000 small businesses in the United States closed their doors! The numbers for 2008 haven't been tallied up yet, but they are going to be significantly worse. While the government is bailing out the large corporations, small businesses will continue to struggle and eventually go out of business.

So why do so many small businesses fail? Each situation will certainly be different, but there are some very specific reasons why of them fail, and I am not including the obvious one- not enough money! If you find more than one of these 5 reasons that applies to you, it is time to take some action

1. Lack of Scalability- often when starting a small business, you may be the only employee. As the company starts to grow, most small business owners will continue to take on more and more work, rather than hiring people to grow along with the company. At some point your business begins to suffer because you run out of hours in the day.

The most successful small business owners will try to forecast growth and begin hiring people that can help manage it. While it may sound crazy to recommend hiring people in a bad economy, now is when you will be able to find the most qualified people that will be able to take your business to the next level.

2. Lack of Focus- while it may be painful to hear, you can't be good at every aspect of your business. The small business owners that fail, spend too much time working on the jobs or responsibilities they are not good at, and lose focus on what they specialize in. If you have no experience with computers, why spend precious time trying to build a website on your own?

Outsource it and get back to doing what you are good at. If you are good at sales and have a passion for dealing with your customers, does it make sense to be hidden away in the warehouse or back office? Find someone that can do that for you, and focus your time and efforts on the areas where you can have the greatest impact.

3. Competing on Price Instead of Value- This is one of the biggest problems, especially in the current state of the economy. As soon as sales start to slip, small business owners make the mistake of discounting the prices on the products or services. Once you give up that margin, you will never be able to raise your prices back up and you will never win selling based on the cheapest price (unless you are the only source for that product or service, there is always someone that will sell it for less than you).

Rather than getting into a price war, add value to the product instead. How you add value will depend on what you are selling, but it can be anything from adding a free bonus to their order, or offering a free test sample of another product or service that you offer. There are hundreds of ways you can add value, but the goal is to separate yourself from the competition without having to compete solely on price. In the long run, your business will be stronger and more profitable.

4. Selling the Business Rather than the Product- How you market or advertise your products and services is just as important as the product itself. Too many small business owners talk more about the business in their sales copy than they do about what the product or service will do for the customer.

Here is an interesting little test...

Take a recent ad or flyer that you wrote and count the number of times "I", "we", or your company's name is in the ad. Then count up the number of times that "you" is in your ad. If the number of "you"'s in your ad isn't at least twice as high as the first one, than you are literally losing 50% of the potential customers that read it. The small business owners that succeed are the one's that can effectively market their business by focusing on what they can do for the customer rather than just the features of the products or their company. If you are not an expert at writing sales copy, I highly suggest that you find a company that is, and let them do it for you. It makes a world of difference!

5. Advertising in All the Wrong Places- Even business owners that do know how to effectively sell their products, can still end up failing because they are not advertising in the right places and finding the right markets. Too many small business owners think that just because they are a local business, they don't need to have a website or advertise on the internet.

This is the biggest advertising mistake you could make. Regardless of what industry you are in, the majority of people turn to internet search engines to locate buinesses they are looking for (not the phonebook). There are literally hundreds of ways to generate a huge amount of local traffic on the internet with targeted marketing, and most of them are free advertising!

If you are focusing all of your marketing efforts on the local newspaper, town flyer, and maybe even radio, then you are doomed to go down in flames. You don't have to spend thousands of dollars on a website, but it should provide some basic information about your company, some testimonials from other clients, and some other very basic stuff. If you want more details, check out some of the links below.

As I mentioned before, if one or more of these reasons applies to your business, it is time to take action. Most business owners don't see it coming until it is too late. Follow the link for additional information about advertising, and some of the Small Business Marketing Secrets I used to literally generate over 8 Million unique visitors per month to just 4 of our websites.