The Two Reasons Businesses Fail

Difficult times but the same challenges

It’s a tough time for businesses around the world as COVID-19 is changing the opportunities that some businesses have to grow and also survive. Obviously, the challenges we face as business owners are greater than we have experienced for sometime. That said when faced with such adversity I find going back to acknowledging ownership of the basics helps remind us of the key things that are and always have been, important when insuring company success.

There are a lot of reasons businesses fail but these are the top 2 reasons most businesses don’t achieve long term sustainability.

•          Failure to generate a customer base

Unarguably, the most important reason for most business failures is their inability to profitably attract and keep customers. If we accept this how do we break this process down and there are a few common mistakes that business owners make when trying to generate customers and retain them to create a long term profitable customer base?

Many business owners often fail to understand that if the product or service being offered is not aligned with the needs and wants of their target audience, it won't matter how much you invest in marketing or sales teams, you simply will not be able to attract and convert enough of the right customers to build a sustainable business.

Even with the right marketing strategy and a professionally trained sales team, if you target the wrong customer, it will be a total waste of resources. Your money, efforts, and time, will avail to nothing.

Each person running your business or company with you must know the ideal customer profile. When that is communicated properly, finding the right customer and insuring they stay with you be a lot easier.

It is also much easier and productive when you know the language of your ideal customer, you will be able to effectively engage with them as a marketer or customer service representative.

Another important aspect which is related to knowing the right customer, is the failure to understand and communicate the product or service you offer effectively. You must distinctly define your value proposition. What is the value I am providing to my customer and problem of theirs am I solving? Once you understand this, ask yourself if you are communicating it effectively and asking the right questions. Does your marketing connect with what you are saying?

Effective marketing and a well trained laser focused sales team is vital in generating a sustainable customer base for businesses. There’s a need to focus on a structured lead acquisition strategy, sales training and monitoring processes alongside an overarching commercial business plan to generate a productive customer base that buy your products or services and stay the course with you. 

•          Failure to get invoices paid

It’s almost everyone’s dream to have a great company with happy customers and if you achieve this then that is only half the battle. If your clients aren’t paying you at all but as importantly on-time, for the job well-done, either with a promise to make it up later or no explanation at all, then there’s a problem that is going to catch up with your cashflow quickly.

It would have been a different interesting story if you could get paid before you do the work but, unfortunately, these business models are rare and the exception not the norm.

So what do you do to address this?

It is all about financial information, proper processes and effective communication!

Have your financial information up to date and ideally an understanding of your bad payers? This should be as in real time as possible so you can see at a glance the cashflow position of the business.

Have a really structured approach to issuing and chasing invoices. Keep to a plan and make sure this is done in a non-aggressive but organised way. Think about the language you use in your correspondence and how you would like to receive such information.

Issue invoices on time, follow up every 3 working days if overdue, have template letters to ensure continuity and an underlying escalation process as the debt gets old, also make sure if you set a customer a deadline you stick to it so they know you are serious. Finally, have access to good legal council to enable you to have an effective chance of firstly assessing longer term customers debt recovery viability as well as a better chance of recovering monies from customers that have the ability to pay.

Poorly planned or executed marketing strategies, and not getting paid after a job is done are the perpetrators of many business failures, this has always been the same and now we should remind ourselves of these lessons as we head into a new and tougher trading environment.