Why do small businesses fail?

June 16, 2013 By Laura Humphreys Leave a Comment

sorry we're closedAccording to a Dun & Bradstreet* study, ‘businesses with fewer than 20 employees have only a 37% chance of surviving four years (of business) and only a 9% chance of surviving 10 years.’ Restaurants have only a 20% chance of surviving two years. Of these failed businesses, 90% closed because the business was not successful, did not provide the level of income desired, or were too much work for their efforts. The failure rate for new businesses was 70% to 80% in the first year and only about half who survived the first year would remain in business the next five years.

I spend much of my life working with and listening to small business owners, and I am now certain the true reason so many businesses fail (cease to exist) before year four is because people go into business for the wrong reason.

When I make presentations to business groups and ask why they chose to start a business, the answers are always the same. I wonder if you identify with one or some of these reasons people give:

  • I thought I could run a business better than my boss.
  • I was tired of working for someone else.
  • I wanted to be in control of my destiny, choose my own hours, and go on holiday whenever I felt like it.
  • I am good at something or trained in a particular field and have built my business around my skill set.
  • I had a good idea and believed I could make a business out of it.
  • I don’t know; it just sort of happened.
  • I want to help people, I’m not in it for the money (this response is particularly true of health practitioners).

Do any of these answers resonate with you? Have you really given much thought to why you are in business or what you really want out of it? Or have you stumbled into business as a reaction to your own personal circumstances without a true sense of purpose driving you?

It’s important to ask yourself; because your reasons for being in business will determine the way you approach it, which, in turn, will influence the ultimate success you have.

There are only two reasons to go into business for yourself:  to make money and to make a difference.  My book Liber8 Your Business shows you how you can do both and build the business you really dreamed of.  I’m looking forward to sharing it with you soon.  In the meantime if you have any questions about your business  model feel free to email me laura@liber8me.com

Cheers
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*Dun & Bradstreet is a public company headquartered in Short Hills, New Jersey, USA that licenses information on businesses and corporations for use in credit decisions, business-to-business marketing and supply chain management. D & B maintains information on more than 205 million companies worldwide.

If you want to put your business under the spotlight – Laura’s next Acceler8me Programme, inspiration and support for passionate business owners, kicks off in August.  Click here for details

 

Filed Under: All articles, Business success, Daily small business mentoring tips, Top Tips Tagged With: business, Business advice, Business blogs, Business book, business coaching, business mentor, Business mentoring, business owners, Business partnerships, business planning, business planning tools, How to write a business plan, small business mentor, success

Freedom is knowing you’d keep doing what you are doing if you knew you were about to die

June 10, 2013 By Laura Humphreys Leave a Comment

STEVE-JOBS1

I just watched this amazing speech from Steve Jobs when he knew he was going to die.  It moved me as I expect it will you.  Watch it by clicking link below then come back and tell me what you think.

http://youtu.be/a5SMyfbWYyE

Understanding freedom and how important it is to us as human beings is becoming an obsession of mine.  Freedom is the very essence of happiness.  Life is a gift, we don’t have long in the scheme of things.

So what is your answer to the late Mr Jobs’ question?

 

 

 

From the desk of Liber8me. Small business mentors and publisher of Liber8 Your Business:  The revolutionary business planning technique that will set every small business owner free.  Get your copy here http://liber8yourbusiness.com/

 

Filed Under: All articles, Business success, Daily small business mentoring tips, Laura's rants Tagged With: business, Business advice, Business blogs, Business book, business coach, business mentor, Business mentoring, business owners, business planning, Exit strategies, Inspiration, success, Talks

Why I invested $24,000 per annum in external advice in my second year of business… and how it paid off.

May 20, 2013 By Laura Humphreys Leave a Comment

money-treeBusiness owners listen up.  I’m going to make a point I believe PASSIONATELY in.  I’m going to share with you the one decision I made early on in business that ensured my success.

The business was my advertising agency, Red Rocks. The decision was to hire two external Directors.  One was a retired advertising guy who added both experience and credibility to my fledgling agency.  The other was a smart and logical businessman who I knew would challenge me.   I had my Yoda and my Dr Spock… both complimentary to my creative, slightly wild approach to business. We agreed I would pay them each $1,000 per month each – not much really compared to standard Director’s Fees.  But for me it was $24,000 off my bottom line in my second year of business.  It was a terrifying decision.  I was barely making that much in profit!  I knew I’d have to seriously up my game in order to afford them.  I was scared, but I was sure with the right action plan and these two men to challenge and support me I could get there.

I can now say with complete certainty that it was the best business decision I ever made.  Business ownership can be a lonely business.  I couldn’t afford to hire senior people to bounce ideas off, to give me feedback on my strategies.  I was naïve when it came to business and needed guidance around the financial goals I set.  I was headstrong and had regular love affairs with my own sense of brilliance (always followed swiftly by equally strong feelings of inadequacy).  My lack of business experience and fleeting spells of over-confidence made me a dangerous force.  But with my two Directors meeting me every month, I had to get my act together.  I had to have a solid business plan, with convincing strategies.  I had to set targets and run a budget.  I had to grow up and learn not to be a solo operator.  With my two Directors guiding, challenging, supporting and motivating me I grew my business rapidly year on year.  My profits grew alongside my sales, thanks to aggressive new business targets and tight control on expenses.  I stopped looking at their fees as an expense and viewed them as an investment.

Now I strongly advise all small business owners to invest in an external advisor of some sort.   You can look for an independent Director like I did, or you can get an Advisory Board.  Or you can bring in a mentor or coach to work alongside you.  A piece of cautionary advise whichever way you go, is to be sure the people you invite into this critical role have earned the right to be there.  They MUST be experienced business people, who have successfully built their own businesses and understand what it’s like first hand to be in your position.  Please DO NOT hire a business coach who has never owned a business or engage a Director who has no experience with governance.

Having been on the receiving end of good external advisors, I know how important it is.  I have a couple of spaces coming up and am looking for a committed, ambitious and dedicated business owner to work with me.  You can be sure I’ll challenge not only you but your business model too. My aim is to see good businesses become exceptional businesses.  If you’d like to talk to me about my mentoring programme click here:

http://www.liber8me.com/one-on-one-mentoring-programme/

  From the desk of Liber8me.  Business mentors and publisher of Liber8 Your Business – The revolutionary business planning technique that will set every business owner free.

Filed Under: All articles, Business success, Daily small business mentoring tips Tagged With: Branding, business, Business advice, Business blogs, Business book, business coach, business coaching, business mentor, Business mentoring, business owners, business planning, business planning tools, small business mentor, success

What’s the one question every business owner should ask to decrease owner dependency and increase value?

May 13, 2013 By Laura Humphreys Leave a Comment

question markWhen I interviewed 2012 Young Entrepreneur of the Year Sam Hazledene, I asked him about his strategy for growth.  This is the guy who built the largest medical recruitment company in Australasia from scratch in a few short years.  He told me that he’d grown organically, starting out with just himself and his wife travelling the country trying to convince hospitals to use their recruitment service.  With a great point of difference and a lot of passion they rallied customers remarkably quickly.

The business expanded and Sam needed to grow his team.  He hired from the bottom up – firstly filling the more logistical roles until he could afford more specialised senior people.  This was exactly the same approach I had to growth with my first business.  When you are funding growth out of cash flow this can an effective way to do it.

At first, Sam told me, he was reluctant to let go of things, not believing anyone could do a job as well as he could (sound familiar?).  But he began to ask himself a question, which enabled him to get his ego out of the way.   It’s a question I now share with my mentoring clients and once asked, you just can’t forget it.

The question is this:

“What can I and only I do?”

Start asking yourself this question on a regular basis. Make a list of everything that you do.  Then go through the list and highlight the things that only you can possibly do.  Check the list and then sleep on it.  In the morning go through the list again and make sure you are being honest.  There will be things still on that list that others could do if you let go, trained them well and trusted them.  So ask yourself again:

“What can I and only I do?”

Be willing to let go of all the things you could hire others to do as well as, if not better than you.  These should include pretty much all administration, book keeping, project management, HR, legal and other operational roles.  And as quickly as you can afford it, replace yourself with people who have the skills and experience for all of the other roles within your organisation too.

Ultimately you want to get yourself to the point where the answer to the question is vision, strategy, business development and culture – in other words being the leader of a great team.

This is what Sam did to grow his business.  It’s what I have done with my businesses.  And it is the key to creating true value in your business.  A potential buyer will find your business far more attractive if you are leading a team rather than doing all the work.  So the next time you find yourself in overwhelm and wondering how on earth you can decrease your business’ dependence on you… remember the question and start letting go!

From the desk of Liber8me.  Business mentors and publisher of the book Liber8 Your Business – pre-order your copy by emailing laura@liber8me.com

Filed Under: All articles, Business success, Daily small business mentoring tips, Entrepreneurship Tagged With: business, Business blogs, Business book, business coach, business coaching, business mentor, business owners, Business partnerships, business planning, business planning tools, Business systems, Small business, small business mentor, success
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