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Business Survival, the Top Three Reasons Business Don’t Survive

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Business Survival, the Top Three Reasons Business Don’t Survive

I remember watching The World Around Us as a child and being mesmerised by the footage of baby turtles emerging from their shells and instinctively heading straight for the water. 

Their tiny, fragile forms raced in the hundreds toward the ocean’s edge; toward their destiny in the great ocean beyond. I also remember my wide-eyed awe, turning to horror as gulls swooped from the sky to peck them up.

I moved to the edge of my seat, willing the survivors to safety. I bit my nails as they determined to reach the sea; struggling with each lap of the waves, drawn out as the water receded and then slapped back on the beach by the force of the next.

The camera filmed underwater as the new arrivals swam freely in the world they were designed for. Silhouetted by the moonlight and surrounded by the swirling current, they paddled beyond the bubbles and churning sand, to the depths.

Just when I thought they’d reached safety, their water born predators began to pick them off; schools of large fish, crabs and eels popped out from coral and rock ledges as the turtles frantically looked for shelter.

When the commentator revealed the shocking statistics that only 1 in 1000 would grow to adulthood, I found a greater respect for the humble sea turtle.

Business survival.

Business statistics can be uncertain. When we look at the number of businesses who don’t trade beyond four years, for example, it doesn’t just include those who were forced to close their doors, but also those who chose to. The numbers aren’t therefore terribly reliable.

What is helpful though, is to look at the reasons businesses don’t survive.

The top three reasons have remained fairly constant over the years and are something we can look at to extend the life of our businesses and increase our odds of survival:

1. A lack of strategy.

Lots of entrepreneurs have the ideas and energy for business but lack a strategy for growing their venture. Getting a business ‘up and functioning’ is no small feat. It takes long hours, creativity and resourcefulness to get to that point.

But what then? Long-term business plans and goals are helpful, but a more realistic approach for businesses in their infancy, are short-term plans that can be executed quickly. Opportunities for Small Businesses wax and wane; their resources are generally stretched, and a large degree of unpredictability exists in their week to week operations.

Strategy for startups is largely based on knowledge and flexibility. Understanding the critical numbers for your business, knowing your ideal client, and being aware of how changes in the market will impact on your business, will help form adaptable strategies.

2. Cash flow problems.

Cash flow issues can be problematic for businesses well beyond the critical first years. The difference is that in the early days, it may not have been anticipated. It’s a reasonable expectation that customers will pay on time, but sadly it’s often not the case.

The flow-on effect for startups, in particular, is that they can’t meet their own commitments and plans for growth. So even if they did have a good strategy in place, poor cash flow will put an abrupt stop to carrying it out.

So, allow for outstanding invoices in your budget. Make sure you have good systems in place to manage invoicing and payments, and for practical tips on preventing cash flow problems, read my previous Smallville article, A dozen ways to keep your cash flowing.

3. Lack of experience.

Building a business from the ground up requires a broad skill set. Some skills are acquired through formal education, and others are experiential. The problem with learning through experience is that it hurts. It’s often a beneficial lesson, but it costs time, energy and resources that need to be committed elsewhere.

The best way to gain experiential knowledge is to find people who have travelled the path ahead of you. Look for a business mentor or coach, and make a point of listening to the horror stories of other business owners so you can avoid their mistakes.

Although these issues are identified as risks to new businesses, they don’t magically disappear at the four-year mark.

If you’re further down the track with your business, do an assessment of how you rate in each of these categories and if necessary, put steps in place to ensure your longevity.

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