Sunday, March 3, 2013

Avoiding Business Failure. How Not to be in the 50% That Don't Make it.

I was recently re-asked a question about business failure rates that prompted me to think about an article I worote awhile back about how to avoid busness failure.

The Australian Bureau of Statistics has periodically released a report titled: Counts of Australian Business that looked at (amongst other things) the mortality rates of businesses. For businesses earning between $50K and $200K, the business exit rates was 50% in 3 years.

Although business exit rates do not equate exactly with mortality rates, as some businesses are sold, others change names and in some cases the principal retires, the truth is that SME’s are perennially under pressure and many simply do not survive in the current, competitive business climate.

More than ever before businesses need to avoid falling into commonly seen marketing pitfalls.




Here are 5 that can be easily avoided.

1. Assuming you know exactly what the customers needs are.

Perhaps the fast way to ensure any retailer fails is to assume you know what the customer wants.

Leading Australian market researcher, Frank Domantay (Managing Director of  Decision Insights) says: “Successful businesses routinely do customer research that allows them to understand what they are doing well and what they are not doing so well.”

This research can be in the form of a survey, one on one interview or focus group. With the results directly feeding in to strategic planning for the retailer and

often being the first indication for the need to change some aspect of the business or its product offerings.

For example a recent survey done by a local Melbourne based, medical clinic found great dissatisfaction by patients in the approach by the front office staff.

As a result, the staff was retrained on both customer relations and social style training.


2. Try to market yourself exactly the way your key competitors do.

To fully understand how important this point is, you need to understand that the customers need is really made up of 2 things. Firstly:

The met portion of the need which are the elements that customers are already satisfied with and secondly, the even more important unmet need, which is where the real

opportunity lies to standout from the crowd. Now if you for example, your business follows your competitors blindly and mimics everything they do, you will basically be meeting the same met portion of the need and leaving the same unmet portion of the need.

An example of a retailer that did not follow it's larger rival's example, was Dial a Dino's Pizza. They were the first to include free home delivery and as a result differentiated themselves in a

way that not only made them successful, but ultimately compelled the market leading Pizza Hut to buy them out or risk losing market share.


3. Taking your customers for granted.

The ongoing support of key customers must also be acknowledged with incentive schemes designed to both reward and maintain customer loyalty, as well as drive demand for future purchases.

These schemes do not need to be complex. Trendy cafe Buddha's Belly offer a simple scheme on their business card, where they offer a free coffee after 5 purchases. Simple but effective.

Larger organisations like Subway have a similar card that offers a free drink after 8 purchases of their subway sandwich. These are simple ideas that work.

It's important to remember that for alot of businesses the 80 / 20 rule applies. That is that 20% of your customers generate 80% of your business. The bottom line is, know who the 20% are and reward them for their support.


4. Fail to strengthen areas you have identified in your business as weakness.

There is do doubt that a business is only as strong as it's weakest link.

You may have a great product but if it is incorrectly priced, poorly promoted or not consistently available in the store due to unreliable suppliers, it will fail. These or any other ongoing weaknesses must be promptly addressed to ensure the businesses ongoing success.

For example, critically acclaimed 12 part mini series Camelot, after it's first 2 issues, suffered from an irregular printing schedule due to unreliable product suppliers which caused the

series to fail. Today's consumers are more aware and less tolerant than they have ever been and any on going weakness your business has that it does not seek to overcome, will translate into lost customer loyalty and sales.

5. Lose your overall perspective and work / life balance.

As important as it is to perform well and run a profitable business, businesses must always be wary that their business has the potential to take over your life and leave you with an imbalance between your work and the rest of your life. This is a complex issue but there are some key strategies that can help.

1. Schedule time outs and honour them.

2. Take a time management course that will teach you to be more efficient with your time.

3. Learn the power of delegation, once you have established that an individual is capable of doing that task or role.

Summary:

It is well recognised that many businesses will fail in their first few years of operation.

Many of those who did go on to fail, failed to recognise these potential areas of risk.

By proactively following these guidelines, you will lessen your chances of joining their ranks.

Thanks for stopping by and I hope that this post will help you with your business.
And until next time, good luck and good marketing.
Regards,
Daniele.