June 2003      Vol. 12, No. 6  REAP HOME PAGE  A publication of the Center for Rural Affairs    
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Takin’ Care of Business or Take this Job and Shove It?
How to help your business avoid failure and be a success. We share mistakes to avoid and things you should do for your business.

BY JEFF REYNOLDS, REAP PROGRAM DIRECTOR

The first and most important thing you need to succeed in a small business is knowledge. According to a Dun & Bradstreet report, “Businesses with fewer than 20 employees have only a 37 percent chance of surviving four years and only a 9 percent chance of surviving 10 years.” Restaurants have a 20 percent chance of surviving 2 years.

Of these failed businesses, only 10 percent close involuntarily due to bankruptcy. The remaining 90 percent close because the business was not successful, did not provide the level of income desired, or was too much work for the effort.

The old adage, “People don’t plan to fail, they fail to plan” certainly holds true when it comes to small business success. The failure rate for new businesses seems to be around 70 to 80 percent in the first year. Only about half of those who survive the first year will remain in business the next five years.

While no person should start a new venture preparing for failure, they do need a clear plan for success that involves what to do if things go wrong. Every business has a life span depicted by its business life cycle. A business life cycle is normally defined by four stages: Introduction, Growth, Maturity, and Decline.

Most business life cycles experience a slow introduction and growth stage, a short maturity stage, and a rather quick decline stage. Determining why most businesses fail can be helpful in identifying the eventual decline phase of a business.

Leading Management Mistakes
According to Dun & Bradstreet statistics, 88.7 percent of all business failures are due to management mistakes. The following list summarizes the 12 leading management mistakes that lead to business failures.
Going into business for the wrong reasons.

  1. Advice from family and friends.
  2. Being in the wrong place at the wrong time.
  3. Entrepreneur gets worn-out and/or underestimates the time requirements.
  4. Family pressure on time and money commitments.
  5. Pride
  6. Lack of market awareness.
  7. The entrepreneur falls in love with the product or business.
  8. Lack of financial responsibility and awareness.
  9. Lack of a clear focus.
  10. Too much money.
  11. Optimistic/Realistic/Pessimistic

Management To-Dos
No magic solutions will guarantee a business success. However, the following items should assist in improving the chances for success.

  1. Develop a business plan.
  2. Obtain accurate financial information about the business in a timely manner.
  3. Profile of a target customer.
  4. Profile of the competition.
  5. Going into business for the right reasons.
  6. Networking with other business owners in similar industries.
  7. Don’t forget, someone will always have a lower price than you.
  8. Realize that consumer tastes and preferences change.
  9. Become better informed of available resources.
  10. Work with your local REAP association and/or REAP Business Specialist.

Proper planning is critical to the success of a new business. While some of the best prepared and best planned businesses still fail, an understanding of the reasons for failure can help assess the overall success potential of a business.

In planning against failure, be honest and objective, know yourself and your limitations, and be prepared to really manage the business. There are many ways to achieve business success. Study the success of others, identify business role models, and network with other business professionals.

In the end, who truly knows what the definition of success or failure truly is? To me, meeting the goals that are set constitutes being successful. Does this mean that, if we don’t succeed, we are a failure? I don’t think so.

Operating a small business truly relies on many factors, and sometimes it just isn’t meant to be. The true entrepreneur is the one who keeps on trying and perseveres. We have the ability to help each other through positive networking at our REAP meetings and trainings.

I challenge each of you to take advantage of the wealth of information available at your meetings and in your local area. Plan on discussing this article at your next meeting and always feel free to contact your area REAP Business Specialist. We are here for you and will do what it takes in your quest for success!


 Contact: Jeff Reynolds, jeffr@alltel.net with questions or comments.
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