In the US, 6,000,000 new businesses are started every year. In their first year, almost 20% of these will have failed, and approximately half of them will have failed before the 5-year mark. Setting up a successful business requires overcoming a torrent of unique challenges.
For first-time entrepreneurs and small business owners, understanding these stumbling blocks and how to overcome them can be the difference between failure and success. Thankfully, countless successful entrepreneurs have shared their experiences overcoming these common roadblocks.
In this article, we’ll be taking a look at some expert opinions on major stumbling blocks that stand in the way of new business success. As well as exploring how and why these stumbling blocks take down so many businesses, we’ll discuss how you can turn them into stepping stones to success. Let’s get down to business….
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Lack of Fundamentals for Success
Every successful business is built on a strong foundation. Business and accountability coaches Jen Emslander and Teri Johnson preach a solid business plan more than any other method to success. “There are foundational pieces that every business owner needs to pay attention to, to build their business upon. Those are universal,” Johnson explains.
“We connect and meet with business owners who choose to work with us because their foundations look like Swiss cheese. They take one thing and run with it because it seems like the path to least resistance, but they don’t have all of the fundamental pieces in place to continue to grow,” Emslander adds.
When you’re setting up your business, you’ll need to have:
- A clear value proposition
- A target market and reasons for targeting them
- A viable business model to serve as your roadmap to success
- Adequate financial systems
Your business plan will then serve to analyze these areas to determine how best to utilize them for your success. By setting out goals and clear strategies to reach those goals, you won’t need to backtrack once your business takes off, and can continue to grow uninhibited.
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Lack of Innovation
When setting up your business, an innovative idea and approach to that idea will set you apart from the very start. However, many entrepreneurs choose to replicate past success stories instead of pursuing their own paths. While this might work initially, it can lead to over-saturation and an inability to break out ahead of the competition.
Gary Gould, CEO of Compare Cloudware strongly warns against this approach. “Avoid the ‘but it’s always been done that way’ mindset,” he preaches. “Be prepared to challenge established thinking; look for new ideas that will enable your business to be more successful. Bounce your ideas off people close to you who you can trust.”
Staying away from tried and tested methods may be risky, but it can leave you with a foolproof idea that captures customer attention, and solidifies your success right from the start. Seeking collaboration with other entrepreneurs can be a good way to build upon existing ideas and find approaches you might not have considered otherwise.
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Passion in the Wrong Places
“Entrepreneurship is a rocky path,” warns Neeta Patel, CEO of the New Entrepreneurs Foundation (NEF). “Without resilience, you are not going to make it!” One of the best ways to ensure you can see your business through its unique industry challenges is with passion. "Don’t do it unless you are passionate about it,” Patel explains. However, she also adds that an unshakeable passion for your business, rather than your industry, can lead to tunnel vision.
Patel believes that business owners need “a dispassionate approach when valuing whether their idea is any good.” Otherwise, they fall into something known as the gambler’s dilemma, throwing their money at the idea and simply praying it will come off because they believe it’s good, and so should everyone else. However, all this approach does is run down your resources and damage your reputation overall. For Patel, “knowing when to call it quits,” is one of the strongest skills an entrepreneur can have. It may be easier to try something new than to waste your time attempting to overcome unsurpassable stumbling blocks.
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Fear of Failure
On the other hand, the reality of this failure is the very reason why many entrepreneurs don’t do enough to keep their businesses afloat. “We have to be willing to be wrong and to fail at the little things,” coaches Eric Ries, author of The Lean Startup. “But modern management says, ‘Failure means you get dinged.’” In fact, falling victim to smaller challenges can help prepare you to deal with larger stumbling blocks, and give you a good idea of when a risk is truly worth it.
“If someone comes to you and claims that they didn’t fail this year,” Ries continues, “you know one of two things: they’re either lying to your face or they were incredibly, unbelievably conservative.” And conservatism that stems from fear of failure is not going to help your business grow. Ries cites Kodak and Blackberry as two examples of how playing it safe don’t always work.
“Pick your favorite company in the last few years that’s gone from a $100 billion market cap to $5 billion. And ask yourself, ‘Was playing it safe actually that safe?’ I don’t see the evidence that that’s true.” Sometimes taking a risk on something unique or organic can push your business ahead of the competition. Oftentimes, if this risk backfires it’ll still put you ahead of where you would’ve been had you played it safe.
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Struggles to Maintain Customer Relationships
Remember that statistic about 50% of businesses failing in their first five years? Well, 34% of those failed because they didn’t have a product-market fit, and 22% failed due to poor marketing. James Chang, senior marketing director at World Financial Group, found that he had this exact problem when pushing his businesses toward success.
“The same challenge I share with many other business owners is touching enough people’s hearts and getting their attention. Many people today jump to conclusions quicker than you can finish your sentence. Customers have lost the patience to fully understand something, give me a good listen and open their hearts to a genuine and sincere conversation.”
Customer relationships are the cornerstone of business success. Draw customers in and foster a connection strong enough to keep them coming back for more, and your business is made. Doing this continuously while capturing and keeping people’s attention in an increasingly consumer-centric space, while simultaneously avoiding brand fatigue, is another issue entirely.
Chang opts for the tried and tested method of creating and then satisfying a need for customers, primarily through social media. “Currently, I approach it by building a presence online that will focus on giving instead of selling. I’m hoping by giving value and building a public presence, I can attract those who share the same inspiration and aspiration.”
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Inability to Diversify
Following on from the above, once entrepreneurs have found something that works, many of them place all their focus on scaling that business. However, scaling is not going to help much if market trends change and customers begin looking elsewhere. Pouring all your capital into the same idea you started with will leave you with a much larger problem if customers’ wants and needs do sway.
This is why Ari Libarikian and Belkis Vasquez McCall, partners at Mckinsey, believe flexibility, adaptability, and diversification are the keys to lasting business success. “Only 24% of new businesses that we’ve seen launched in the past 10 years are viable, large-scale businesses today,” Vasques McCall explains.
“The most commonly cited area where the other 76% stumbled is lack of adaptability, not having the flexibility to react to changes in their environment or in their market. The second is around significant unexpected disruption in the market or business environment, this is around whether you are aware of other opportunities.” Scaling one value proposition can be challenging enough, but as Libarikian adds, if you stick with only one product or service, “You’ll eventually have a product and a value proposition that gets stale, and doesn’t end up scaling any further.”
Diversification involves listening to your target market and determining their needs in the future as well as at present. Utilizing technology to measure customer journeys through your site and sales funnel can be a huge help, as well as more traditional methods such as reviews and points of contact. Using this data, you can pivot your current marketing to focus on refreshed selling points, optimize your site and services accordingly, or add and effectively market entirely new products. Diversification not only helps scale your business but also reduces your dependency on a single income stream or customer base.
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Talent and People Management
Finally, one of the key areas where small businesses fail relates to the talent they bring on board, and how entrepreneurs manage that talent. When he spoke to the Harvard Business Review, Amgen CEO Kevin Sharer shared his experience opting for the wrong people management strategy.
“I announced that we had the wrong conceptualization of the business. I said that we should be organized by markets rather than by geography. Ultimately, my ideas were accepted and implemented, but that didn’t matter. The way I went about making my views known guaranteed I was immediately isolated,” he divulged. “The division presidents, whom I relied on to carry out my sales and marketing initiatives, saw me as an adversary who was trying to reorganize their jobs rather than as an ally trying to win the brutal fight against our competitors. Finally, Bert Roberts called me into his office and said, ‘Look, Kevin, I’ve heard from a lot of the division presidents, and you’ve got real problems. You’ve got to quit trying to do their jobs.’”
The people you bring on to see your small business succeed are the most important allies you have. Not only do they have the expertise to complete their specific tasks. Without their help growth is all but impossible. This is why entrepreneurs must approach organizational changes and communication strategies with sensitivity and collaboration. Entrepreneurs at any stage of success should recognize that fostering a supportive and aligned workforce is key to achieving business goals.
In Conclusion…
Often, lack of growth is the largest stumbling block for new businesses in that it leads directly to failure. But along the way, smaller failures in the face of unique challenges shouldn’t be seen as the end of the road. Instead, these are learning opportunities that allow you to utilize your passion and demonstrate your resilience. Above all, establishing and maintaining strong customer relationships and staying attuned to their evolving needs is crucial for sustained, manageable growth and overall success.
Leading your small business to success will always involve challenges and stumbling blocks. From laying a strong foundation with a solid business plan to fostering innovation, having the right talent and people management, and diversifying to adapt to market changes, you’ll have a far better chance at success if you know how to overcome these hurdles before they present themselves. When you’ve transformed these stumbling blocks into stepping stones, you’ll know you’ve built a business that can withstand the test of time. Good luck!
Sources
- https://www.census.gov/econ/bfs/visualizations/countyvisualization.html
- https://www.luisazhou.com/blog/businesses-that-fail/
- https://www.youtube.com/watch?v=YM0erYXDlpU
- https://stanta.co.uk/seven-key-lessons-for-new-entrepreneurs/
- https://www.freshbusinessthinking.com/supporting-young-entrepreneurs-/dont-do-it-unless-you-are-passionate-about-it-says-the-ceo-at-the-new-entrepreneurs-foundation/45543.article
- https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/disruptive-entrepreneurs-an-interview-with-eric-ries
- https://www.luisazhou.com/blog/successful-business-statistics/
- https://eprenz.com/blog/overcoming-challenges-faced-by-entrepreneurs/
- https://www.mckinsey.com/featured-insights/mckinsey-live/webinars/a-winning-approach-to-business-building-the-new-priority-for-growth
- https://hbr.org/2004/07/a-time-for-growth-an-interview-with-amgen-ceo-kevin-sharer
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