Avoiding the most common mistake…
46% of small businesses fail because they ignore a key aspect of business. That’s not overconfidence; it’s a huge mistake!
What do you think it takes to start an ice cream truck business? You need a truck, a refrigerator, and stock, right? And a business license, and a license from the board of health. And the ability to do make change quickly. That’s really about it, from a strictly business perspective. But that’s really just the tip of the iceberg.
You also need to have a good grip on the human factors. You have to know why your market buys the products it does. And you need to know how they think well enough to be able to anticipate a change in demand.
I’ve observed hundreds of businesses. What I often see is a smart leader who has solid business or product experience, but not enough skill, training, or experience in the intangibles that provide the foundation of any successful enterprise.
Understanding people is a HUGE part of business, and it’s a part businesses rarely invest in.
Here’s an example. Recently, a local grocery store remodeled. Paper plates and napkins are across an aisle from motor oil, fuel additive, and Turtle Wax. I have to remember to get a picture! This store paid a consultant at least five figures to guess that people might think of changing their oil when they shopped for a barbecue.
An article in Business News Daily* quoted a CEO who said business owners have to gather information about not just prospects, but competitors and even industries they’re targeting. No other grocery store puts picnic supplies next to car washing products. Because people don’t look for it there, it doesn’t make sense, and customers don’t like it.
Business is about people. In fact, if you look at the reasons for business failure, it turns out that nearly half fail because of a problem with those human factors. These are the “squishy” things, as Ted Coiné calls them. The intangible, hard-to-quantify people skills and knowledge.
Notes: Business expertise failure includes a lack of business experience, a lack of planning or analysis, poorly chosen location, poor inventory management, operational inefficiencies, and unstructured growth. Financial problems are things like insufficient capital, over-investment in fixed assets, poor credit management, poor accounting and record keeping, and personal use of funds. The “other” category, for what it’s worth, included things like natural disasters, illness, and technology crashes.
The biggest problem area, human factors, is made up of things like a lack of understanding of the competition, poor people skills, operational mediocrity, no sense of vision/brand/uniqueness, poorly set goals, no connection with customers, and dysfunctional leadership or management. Ignoring or screwing up any of these factors is, sadly, the most common mistake.
If you have the business angle covered, you’ve still only got 50/50 odds. That whole human factor foundation? Science has realized it’s so important, it’s become a distinct field; it’s what business psychologists (like me) do.
As always, I appreciate likes and shares! Nearly 30 million people in this country work at a small or micro-business. You know someone whose business could benefit!
*Fallon, N. (2014). Networking as an entrepreneur: 3 Steps to make a connection. Business News Daily, 5/15/14. http://www.businessnewsdaily.com/6420-entrepreneur-networking-tips.html