Small business survival – where do you stand?

If you are running a small business or even planning to start one, here’s a small wake up call, according to a rough estimate only half of the small businesses make it to their fifth year, in fact 25% of all new start ups do not carry on for more than a couple of year. Researches have shown various factors that were involved in the demise or survival of these businesses, with the lack of funds (capital) described as the most common reason. Having enough capital however does not guarantee survival as the successful entrepreneurs are also supposed to have experience and better education, good business management skills and the capacity to work hard (that too for long hours). Even if some businessman posses all of this, there’s still a chance of failure because of recession or wrong niche selection.

Reason for emphasizing on low survival rates for small businesses, is not to discourage new startups; however one must be aware and well prepared for the risks ahead and the chances of failures. Internet and magazines are chockfull of small or home based business success stories, whereas nobody talks about those who never make it. In reality, the first couple of years are incredibly hard for new startups as they have to face numerous challenges, like lack of funds, little or no sales, and barriers to entry. You must be realistic about your chances, miscalculations and green pastures will do you no good. Having realistic goals also save you from disappointments later, for example if you haven’t achieved your growth targets at the end of the second year, you can still be happy for surviving so far, knowing that the other 30% of small business weren’t even able to survive this much time.

Managing your finances smartly is very important for small businesses. You need to be as close fisted as possible, keep a strict check on all of your expenses, cut down the unnecessary ones and keep looking for cheaper alternatives for those who are necessary. Hone your speaking skills and get to the task of motivating your sales staff. Offer increments, bonuses or compensation plans to encourage them to make more sales. Closely monitor the results of your marketing campaigns and invest more on mediums that bring more leads. Try and use the less expensive marketing channels more smartly. Recently, recession has prompted consumers to save more and spend less. You can cash in on this mentality by offering different discounts.