No one starts a business just to fail.
Yet, if you look at data provided by the Bureau of Labor Statistics regarding new business survival rates, you quickly realize that your probability of staying open continues to decline over time, with the sharpest drops occurring within the first three years.
What are some of the reasons that all-too-many new businesses fail, oftentimes before they are even able to get off the ground?
Here are a few to consider, as well as some ways to not fall victim to them and wind up sinking your new small business.
Show a Lack of Confidence
While you certainly don’t want to act like you know things you don’t or be overly cocky about your skills, if you don’t show clients and potential clients that you have confidence in your own abilities, why should they have confidence in you either?
Admittedly, when I first started out, I was acutely aware of what I didn’t know. And I’m sure that there were a few times that this showed through, ultimately costing me jobs.
Since then, I’ve learned that I don’t have to know everything there is to know about freelance writing or running a one-person business in order to be confident. Instead, I have three options when faced with clients who want a service that I’m not proficient with.
One is to learn what I need to know to develop a desired level of confidence. For instance, I tend to write a lot about eating a healthy diet, so I’m in the process of becoming a certified nutritionist. This way, when clients hire me to provide this content, they can trust that I have a certain level of knowledge in this area.
The second option is to simply be honest and tell my customer that I’m not comfortable taking the project because I have no experience. This means either passing it up or giving them the name of someone I know who may be able to help them.
If it is something I don’t know how to do but am interested in learning more about it, I’ll take the third option which is to admit that I’m new to that particular service offering, yet I’m more than willing to put in the time and effort to learn more about it if they’re willing to give me a chance.
In cases such as these, it’s not uncommon for me to give a discounted rate. Many times, I even offer a money-back guarantee so if they don’t like what I’ve done, they’re out nothing.
I’ve received several new projects this way and not only gained lifelong clients in the process, but I’ve also learned many skills that have opened up my service offerings even more, enabling me to help my customers in multiple different ways.
When you’re running your own business, if you’re not organized, there’s no way you’re going to make it. Deadlines will be missed, invoices won’t get submitted on time, overdue payments will never be collected, customers will get lost in the process, and, before long, your doors will close for good.
That’s why it is so important to create systems for all of your most important business processes from your very first day. While the types of systems needed will vary slightly from one type of business to another, some of the processes most every company needs to develop include those related to:
- Project management
- Invoicing and payments
- Equipment and supply maintenance
- Accounting and taxes
By establishing these types of systems up front, you’re able to handle all of your business-related obligations, while still providing your customer base with stellar service.
Don’t Pay Your Taxes
I like to listen to the Dave Ramsey Show when I’m out on my daily walk or traveling. If you’ve never heard it, he has a simple 7-step process for getting out of debt and starting to build wealth.
Not only has this helped me pay back more than $20,000 of debt, but my husband and I are also now looking forward to a comfortable retirement earlier than I’d ever dreamt possible. But some callers aren’t quite there yet.
In fact, there have been many times that people have called in to the show seeking financial advice from Dave, only to share that they feel overwhelmed by a giant tax bill because they own their own company and haven’t withheld enough money (if any at all) to pay the IRS.
I don’t know why, but I am surprised each time I hear this type of story because I personally have always had a healthy fear of this governmental entity. And I know that making this one mistake can not only sink my business, but it would likely sink me personally as well.
All Business shares that the most common tax-related penalties small business owners face are related to:
- Underpaying estimated taxes by more than 10 percent
- Not filing taxes on time
- Not paying any late tax penalties that are due
- Intentionally committing tax fraud
Depending on the situation, these penalties may be financial in nature and appear in the form of increased tax payments or, if severe enough, may even involve doing jail or prison time. I don’t know about you, but I don’t think my business would survive any of these scenarios.
Fortunately it doesn’t have to simply by withholding a certain percentage of all of the income you bring in and sticking it in an account that is only to be used for tax purposes. That way, when you’re ready to pay your quarterlies or if you owe more at the end of the year, the money is immediately available.
Not Having a Marketing Plan
If you have a strong business right out of the gate, it’s easy to become lax and let your marketing efforts slip. However, if you’re not constantly bringing new business in the door, one day you’ll wake up and realize that the doors have been chained shut.
In complete transparency, this is one area where I have always struggled because self-promotion doesn’t come easy for me. If you’re in the same boat, it’s important to come to some level of peace about marketing your products and services.
What’s helped me in this area most was joining a mastermind group that reminded me that I offer a lot of value to my clients. So, I don’t have to feel like I’m a slimy salesperson when approaching them to see if there’s anything I can do for them content-wise.
Instead, I’m only offering my skills because I care about their success. This makes it easier for me to talk about what I can do to help them better connect with their target markets by choosing the right words.
By taking this approach, I am finally to the point where I am not spending a lot of time actively seeking out new customers. I currently have a pretty solid and varied base of clients who consistently give me regular work, which keeps me as busy as I’d like to be.
That said, I am still always updating my website and other online platforms so they are search engine optimized and more appealing to my customer base. I also post on social media when I learn a new skill or have a career-related win, letting potential clients know what I have to offer.
Not all marketing has to be in-your-face. Sometimes it is the subtle marketing methods that have the biggest impact.
Don’t Put In the Work
Starting my own business was one of the hardest things I’ve ever done. In the beginning (and sometimes even still today), I put in 16 to 20-hour days. I also worked many nights, weekends, and holidays.
When I wasn’t writing for clients, I was learning how to master content creation. And when I wasn’t doing that, I was taking in as many articles and books as I could to learn everything I could about how to build and grow a profitable small business.
Looking back, I am sometimes astonished that I survived those first few years. I also wouldn’t trade that timeframe for anything because it made me who I am today: a successful solopreneur who is making more than she ever thought possible and living a life that she once only dreamed of.
If you want your business to survive, whether you’re in your first year or your twentieth, you have to be willing to put in the work. Your only other option is to half-ass it and let it sink. I don’t know about you, but that isn’t an option I’m willing to consider.