Britain is full of ambitious and dedicated business owners bursting at the seams with creative ideas, launching thousands of new ventures every month. So why do so many companies fail to grow, or worse, fail altogether? We’ve put together an inward-looking list of the top eight reasons many businesses fail to match up to their potential.
8. Over-reliance on a small number of clients
The 80-20 rules states you get 80% of your sales from 20% of your clients, but if you get 80% of your sales from just one or two key clients then alarm bells should be ringing. Business owners need a contingency plan in case a key client switches to a new supplier or goes bust.
Looking after the clients you have is important of course (as we’ll talk about in the next point), but a business should also always be on the look-out for new revenue channels, which are often hiding in the most unexpected places.
7. Ignoring the existing customer
Whilst the hunt for fresh sales is vitally important for any-sized company, business owners need to also ensure their existing supply of customers are also happy. Opening a dialogue with them and letting them tell you how they want to be served is one simple way of letting their needs be know. This simple act of two-way communication will help build loyalty while keeping the business’ products or services relevant.
Because customer preferences are continually changing, talking with the consumer regularly is must. Keeping an eye on new developments in technology, especially in the growing arena of automation, can help make this process easier to manage for any ambitious, overstretched company.
VIDEO: When you really need to buy a plasma cutter. How EXF Fitness are using finance to expand their bespoke manufacturing business.
6. Failing to delegate
Founders say delegating is one of the trickiest aspects of growing a business; after all, no one knows your business like you do. But failing to pass on key tasks causes problems when your organisation expands and the business owner can no longer handle everything by themselves. Failing to grow staffing levels to match business expansion, or personally not delegating enough responsibility are both sure-fire ways for a small business owner to fail to grow his or her business to what it is capable of achieving.
5. A rigid business plan
Often, experts will extol the virtues of small business owners creating a plan and then sticking with it. In reality, today’s market is an ever-shifting, ever-changing beast. A business plan should be flexible enough to navigate this uncertainty, allowing you to be agile and jump on opportunities as they emerge. Many businesses start doing one thing, then find additional revenue by changing tack. Often, this approach will require putting capital upfront before returns can be realised.
4. Late payment
Late payment is a scourge of growing businesses. You need to make sure they invoice on time and send friendly, but firm, reminders if payment times start to stretch. If a client start paying late on a regular basis, the business owner needs to assess whether they could be in financial trouble, and take proactive action to prevent a negative knock-on effect, should they go bust – leaving them out of pocket and in the lurch.
3. Paralysed by the fear of failure
Cautiousness is an innate human quality, so taking risks is not in everyone’s nature. Although being conservative and watchful is more often than not a wise course of action, a fear of taking any risks whatsoever may prevent you from seizing opportunities essential to your company’s growth. If a business refuses to swim, eventually it’ll sink – the difficulty for the owner lies in assessing what level of risk they’ll accept in pursuit of profit.
If a business refuses to swim, eventually it’ll sink
2. Ignoring the value of credit
Businesses often say they don’t need credit and many are proud to operate using just their own funds. But from our experience, businesses that establish a line of credit have a more robust ability to cover unexpected shortfalls in cash-flow, and to help invest in the assets needed for the business to expand and grow.
1. Wishful thinking
Hope is not your friend. Many businesses stagnate and falter waiting for the phone to ring, or the economy to turn, crossing their fingers that their optimistic sales forecasts will turn out to be accurate. And the end of the day, businesses only grow and thrive when they head out into the wild and seize on opportunities for themselves.
READ NEXT: SEB Brewing Services was born out of the idea that there are a lot more breweries around in London than there used to be. Discover why the banks weren’t quick enough to keep up with them.