To the entrepreneurs who are succeeding, I salute you. The odds of success are not in everyone’s favor. According to the Small Business Administration, roughly 80% of small businesses survive the first year. Then, sadly, only about half reach the 5 year mark and only one in three make it to 10 years.
If you look at the top reasons why, patterns emerge.
According to smallbiztrends.com the Top 10 reasons are:
Source: “10 Reasons Small Companies Fail” by Paul Chaney, July 28, 2016
And, according to the New York Times:
Source: “Top 10 Reasons Small Businesses Fail” by Jay Goltz, January 5, 2011
Looking at these reasons, you know what jumps out at me? Money!
Starting with a sufficient amount, spending it wisely, saving wherever possible, ensuring you have a cushion, and accounting properly are top difference makers. But, if an entrepreneur’s ability to “win at money” was so easily done, thenn many more small businesses would succeed. It’s time to be honest and say, “Maybe I need to pay more attention to the money-side.”
Saving money: Do it today, do it often!
There are a lot of great ideas out there to help small businesses save money here and there: Buy in bulk, use open source software alternatives when you can, implement lower-cost online advertising and marketing, and so on.
Here are some everyday practices that help you be cost-focused at all times.
Dedicate time to finding lower-cost vendors and services: We often start the business using particular vendors and service providers, then get so busy working in the business, we don’t dedicate time to consider lower-cost alternatives. This is a mistake. Find the time to, or dedicate someone on your team to, check and compare prices often. You may find a more cost-effective resource, or have leverage to negotiate the price with the one you’re using.
Dedicate time to reducing operating expenses: Like what happens with our vendors and service providers, we forget to look at how to cut back on operating expenses. Does the cleaning service need to come every day? Do we need a water cooler or can we use a water-filter pitcher in the fridge? Take time to review everything—and if there’s no ROI, cut back to the bare minimum or completely eliminate the extraneous. Better yet, ask your employees for their ideas!
Don’t be shy, negotiate: Are you paying more than you need to? That’s a tricky question–the answer likely is, “Yes,” there’s a least one operating cost you are paying for that’s negotiable. Having the keen ability and tenacity to negotiate price is a skill, and because of that, we’re often apprehensive to start, wondering if it will do more harm than good. But, everything truly is negotiable, from rent, to the phone and internet bill, to office supplies. If you’re working with a fellow small business, they may be more apt to keep a customer rather than lose you to price. Approach it correctly and you have nothing to lose for trying.
There’s also bartering: If no matter the price, if paying for something isn’t feasible, consider bartering. What goods and services do you provide that could be bartered with a fellow small business? For example, if you’re a PR firm in need of an office renovation, could you provide free publicity to a decorator who works on your space?
What are some of the most effective ways you save money every day?
As the New York Times article noted, “You cannot be in control of a business if you don’t know what is going on. With bad numbers, or no numbers, a company is flying blind, and it happens all of the time.”
We’re a small business too, and we want you to succeed. If you need help with the accounting side, talk to us. We offer a free consultation to get you started.
Additional source: “27 Money-Saving Tips From Successful Small Businesses” by Annie Mueller Partner, Mueller Creative, LLC