by Elizabeth Ducie

Created on: December 16, 2007   Last Updated: May 28, 2009

It's an unfortunate, but true, statistic that the majority of small business ventures fail within a short period of time. Why might that be? Let's look at some of the reasons for things going wrong and identify strategies we can use to prevent failure.

A good idea does not necessarily make for a good business

We have a good idea. We think it's going to make us a fortune, turn us into the next Bill Gates. So, we dive in, set up the business, get the cards printed etc etc. But we've forgotten to do the market research. To discover whether other people think it's a good idea too - and more importantly, whether they would be willing to pay good money for our good idea. Maybe there's no market for our idea - or there is a market, but it's already saturated with other people providing the same goods or services. If the product's not right, the business will fail.

People need to know about the business

So, we've done our market research and come to the conclusion that the idea is a good one. There is a market waiting to be serviced and people ready to spend money. Do they know we are there? How do they find us. Setting up the office, getting the phone in place, printing the office stationery may seem like part of doing business, but it's all for nothing if we're not out there selling our name, our company and our services. If the promotion's not right, the business will fail.

The price needs to be right

Suppose we have a really good idea and we tell people all about it - but we over-estimate its value and set the price way over the top. The business will not succeed. It is better if we start at a lower price to make some sales and start building a reputation. So long as the price is fair, people will be willing to pay it. On the other hand, we shouldn't under-price ourselves. People should be paying us, not the other way around. Also, if our services appear to be too cheap, our potential customers will think there's a catch and may well go elsewhere. If the price isn't right, the business will fail.

Putting in the right amount of effort

For many of us, running a small business has long been our dream. Being our own boss, not being told what to do by anyone (apart from those pesky customers of course), working to our own timetable and having time for other things in life - like family, golf or long holidays. If that's our view of starting our own business, we are probably in for a sad awakening. It may well be a vision of life five, ten or even twenty years down the road, but to start with it will be more a case of working all hours, having no time for family or friends and having little choice about what we do. If the willingness to work isn't there, the business will fail.

Conclusion

Running a small business is great fun and certainly provides elements of freedom not experienced when working for someone else. However, success only comes if the product is right, the price is right and people know where to find us. It also requires a lot of hard work. If we are not willing to address these issues, our small business will fail and our dream will be over. On the other hand, if we are willing to face these facts, then we have a chance even in today's harsh economic climate.

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