- Here's what small business owners need to be doing to improve their viability.
By the end of the second year, 30 percent of small businesses fail. This is demonstrated by recent research by Fundera and statistics released by the Bureau of Labor Statistics. While millions of people dream of launching their own business or go on to buy a business, not all of them have the potential to survive long-term or have sustainable profits. Right from the beginning, small business viability is something entrepreneurs should think long and hard about. Implementing measures to ensure their small business thrives for years to come often begins from the very start – and is constantly changing. From continuously assessing and adjusting for business risks to placing enough emphasis on customer feedback, here’s what small business owners need to be doing to improve their viability.
Financial Viability: Be Clear on The Financial Metrics That Matter to Your Business
As a small business owner, the financial performance of your business will be key in whether the business is a viable one. For instance, without adequate profits, you will be running the business at a loss. However, judging a business’s financial performance is about much more than the profits you are generating at the end of each month.
Get to know the best financial KPIs for your business, its industry, and its performance. Financial metrics like your small business’ quick ratio and days sales outstanding are also useful – particularly when gauging your cash flow’s health. A past study by the U.S. Bank found that 82 percent of businesses that failed experienced poor cash flow management, so it’s a great idea to prioritize yours early on.
Operational Viability: Plan and Protect for All Specific Risks in A Business Support Plan
Regardless of your business size, you will face risks and unexpected changes. Contingency planning for businesses is critical – particularly in such unpredictable times. It ensures your business is protected and stays agile to respond to any changes. To do this, outline what risks the business may face.
For small businesses, the largest risks tend to be financial, strategic and reputation risks. Clearly defining the risks your small business faces helps you formulate policies and a business support plan that addresses these risks. For instance, if you run a small business and have no employees, you may face potential income disruption from closure, injury, or loss of business. In this case, securing workers’ compensation, income disruption insurance, or a ghost policy can help. Also, many businesses may be required to secure a ghost policy or other workers’ comp insurance policy as a legislative requirement in their state of operation. Without it, you face legal penalties and a potential shutdown.
Long Term Viability: Listen To Your Customers And Give Them A Voice
The age-old saying that the customer is king still holds merit today. For any small business to thrive in the long term, it must be in tune with its customers and their wants. Opening up the line for clear customer feedback and communication is the best way to achieve this. Encourage your customers to leave their feedback, and ensure any negative comments are tackled appropriately.
It also helps to connect with your local community and businesses. Generating support from locals will become valuable for your returning customer base. It is also a great way to carve out collaboration opportunities to build your business presence.
Before you move towards implementing this, be sure to clarify who your customers are. Do your research on your ideal target market. Get to know their behavior patterns, preferences and demographics. Market segmentation, if used right, is your friend. While these moves do not guarantee the survival of your business, they can certainly improve your chances.