How to fail-proof your business

If you’re an entrepreneur or small business owner, you may already be aware of the dire numbers of success rates. The U.S. Bureau of Labor reports one in five businesses will fail within the first year. After five years, that number increases to nearly 50 percent. And after 10 years, it increases to over 65 percent. Those numbers seem dire, but they can be used as a reminder of how to start your business on the right foot.

If you’re running a small business, or if you’re struggling as a small business owner and need to course correct, I highly encourage you to work through the following.

Before you officially launch your company, you need to build your business plan. A good business plan will help you think through the problem your company solves and will help you think through entire pieces of your business. You’ll build a competitive analysis into your plan, think through how you’ll market your company. You’ll write in detail about your products or services and how you intend to grow in the market. You’ll think through funding as well as marketing and sales. You’ll even project your growth opportunities.

In other words, a great business plan will help you know where to set your sights, not just as you launch your businesses, but as your company grows, too. It should help you build your business with a strong foundation and keep you on track for the future.

If you can start a business with your own funding, that’s great! But that’s not always the case for most businesses. Many businesses need to fund the overhead costs of securing a location, equipment, staffing, and marketing, which are critical to success. Financing issues are often the reason businesses fail, so looking for smart ways to raise capital to fund your business is the best strategy for staying afloat.

Before you start taking out loans that may cause your business to struggle before you’ve gotten it off the ground, consider alternative options. Crowdfunding, finding investors, or working with venture capitalists may help you as you launch your business. You may even want to look for grants or programs through your state that can help cover some costs you may incur as a new business. It is helpful to grow strategically rather than be reactionary.  

How will your intended audience find out about your business? You may already be thinking about marketing, but you’ll need to better understand where your audience spends their time. Simply being on social media alone may not get you the business you need to stay afloat.

You’ll also need to consider your business location. If you need high visibility, the right location might make or break your business. Similarly, consider whether you need to be attending trade shows or events to get your name in front of the right audience. Make sure you’re also signing up for your local Chamber of Commerce or other associations that can help you build up your name and create awareness for the fact that your company exists.

Simply starting your business doesn’t mean that’s where you need to stay. As the market changes and you begin identifying what your customers want from a business, you need to find ways to adapt to stay relevant.

Look for the trends that will help you move to the top of their minds as you grow. They need to see you as a valuable resource that’s worth their time. And if you aren’t willing to make some changes along the way, you could be at risk within your business.

Growth can be intimidating, especially if you need to hire and are concerned about the costs involved. Scaling can feel a bit like the chicken and egg scenario: will hiring people help bring in business, or do you need more revenue to make that happen? That’s why it’s smart to plan for how you’ll do it.

As you did when you started your business, go back and start looking at the information that’s in front of you. You may need to take another look at your business plan. You may also want to talk to a business advisor or coach, or get a financial professional involved. They can help guide you toward making those decisions in a way that will truly help your business expand without setting you up for overhead that can sink a small business.

While success isn’t guaranteed, neither is failure. Putting strategy and work into how you’re running your business can ensure you get to the next level successfully.

Jim Allen is a business leader and entrepreneur who has built one of the top-producing real estate groups in the Triangle. He is President of The Jim Allen Group, which is consistently named one of the top real estate teams in North Carolina and even North America.