1. business and industrial

1
9 Reasons Businesses Fail…
& How to Make Yours Succeed
by Pam Hendrickson
& Mike Koenigs
Every day, entrepreneurs set out to create new products or pioneer services that solve a
pressing problem in the marketplace. Creating successful products and services hinges
on more than just the ideas themselves, however. To be truly successful, your product
needs to be supported by the business you build around it, which includes the marketing,
sales and financial functions to ensure that each product gets the exposure it needs to
flourish, generates the sales that drive revenue and earns significant profits to foster
future development.
Although most entrepreneurs start these businesses with the best of intentions, they often
begin without the tools they need to build an enterprise that stands the test of time.
This reality is reflected in recent statistics from Harvard Business School. According to
Shikhar Ghosh, a senior lecturer at the school, if a start-up business defines “failure” as
declaring a projection and then falling short, the rate of failure for businesses is a staggering
90 to 95%. If it means failing to see the projected return on investment, then the rate clocks
in at 70 to 80%. If failure means liquidating all assets, the rate of business failure hovers
at 30 to 40%.1
However, there is some good news for business owners.
Regardless of size, industry or age, the challenges a
business encounters often follow recognizable patterns.
By spotting these challenges before they become problems,
you can bolster your own business against failure and, in fact,
set it up to flourish, no matter the financial climate.
It starts with recognizing these patterns, then remaining open
to engineering a change. By committing to solutions, you can
as a catalyst to help your business—and your products—beat
the odds to become long-term successes within your industry.
Small opportunities are
often the beginning of
great enterprises.
—Demosthenes
Let’s explore the nature of these nine prevalent business
challenges—and their potential solutions.
1 Harvard Business School, “Why Companies Fail—and How Their Founders Can Bounce Back.” http://hbswk.hbs.edu/item/6591.html
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Reason #1: Uncertainty
The Problem: The business world by its very nature is uncertain.
Unpredictability can plague businesses from many different angles, especially when it
comes to new ventures. It may show up as uncertainty surrounding the viability of an idea,
uncertainty about credit or cash flow, uncertainty in the global economy or uncertainty over
government regulations—among many other possibilities.
The bottom line is that uncertainty leads to short-term thinking, rather than long-term planning.
The Symptom: Progress freezes. Operations are paralyzed due to uncertainty about
the future.
According to a recent study, 61% of small businesses cited uncertainty as their primary
obstacle to growth.2 Additionally, according to the US Chamber of Commerce, uncertainty is
pervasive among small businesses. 49% of small businesses are not certain if their best days
are behind them or still ahead of them and 84% say they are pessimistic about the future.3
This not only leads to the loss of initiative for growth, but it also paralyzes business owners
and ultimately freezes progress.
Even if a business is well into its life cycle, uncertainty can keep its leaders from making the
bold decisions it needs in order to innovate and stay ahead of the competition. For example,
in the face of the economic uncertainty facing the Euro, a Commerzbank study reported that
more than half of the companies they surveyed cited this economic uncertainty as a reason to
delay new projects.4
The Solution: Certainty through testing.
Large fast-food chains like Taco Bell, Wendy’s and McDonalds are constantly introducing new
additions to their menus. However, they don’t bet the farm on innovation and chance. All three
introduce new menu items in small test markets—either locally within the U.S. or globally—to
investigate both how customers react to the new products and how well the products work
within their restaurants.
For example, Taco Bell’s new Doritos Locos line, which has been called Taco Bell’s most
successful new product, was introduced in several U.S. test markets, including Toledo, Ohio,
2 Huffington Post, “Small-Business Outlook: What Are The Biggest Challenges On Main Street?” http://www.huffingtonpost.
com/2012/01/24/small-business-outlook-biggest-challenges_n_1190783.html#s626766&title=Dealing_With_Regulations
3 US Chamber of Commerce, “Prolonged Uncertainty Impacting Small Businesses’ Ability to Create Jobs.” http://www.uschamber.com/
press/releases/2012/october/prolonged-uncertainty-impacting-small-businesses’-ability-create-jobs
4 International Trade News, “Uncertainty Affects Business Planning.” http://www.internationaltradenews.com/en/articles/11585/
Uncertainty-affects-business-planning.html
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which has also been a testing ground for several other fast-food restaurants. 5 Once the
product gained traction in Ohio, it was released to the rest of the country, which embraced it
wholeheartedly to the tune of a million tacos purchased a day.6 The other Taco Bell tests that
didn’t strike a chord—including BLT tacos and cheeseburger burritos—got shelved with a
minimum of invested resources.
Similarly, McDonalds tested chicken wings in early 2013 in Chicago after early success in
Atlanta7 and Wendy’s introduced a pretzel Bacon Cheeseburger in Miami as part of its effort to
brand itself as the home of premium burgers.8 In other words, the success of these massively
successful fast-food chains hinges on the certainty they get through their testing efforts.
When you’re developing a new product, take a page out of their playbook. Start with a small
test group, get their reactions and tweak accordingly. For example, if you’re developing a
comprehensive training system, try offering that training as a local live event. (And film it so
you can use that footage later.) You might also consider offering your program as a series
of teleseminars, which are regaining traction since people don’t need to be in front of their
computers to participate. If you’re creating a physical product, make a prototype and offer it
to a small group of testers to get their feedback in exchange for their testimonials.
The key is to invest the minimum amount of resources you can to get a workable product,
then get feedback you need to make it a blockbuster. Getting real-world experience behind
your product will raise the level of its quality by making sure it meets the needs of your target
market. It will also increase your own personal certainty. By the time you are ready for a fullblown release, you already know that your product will be a hit with your customers. This
certainty will give you all the confidence you need to get out there and think big.
Reason #2: Negative Cash Flow
The Problem: The business spends more than it brings in.
Finding and managing cash flow is a pervasive problem that plagues many companies, both
new and established: if a company grows very quickly, it can outgrows its resources, and
if it falls short of sales expectations, it has more difficulty securing the cash it needs to pay
suppliers and partners.
5 Columbus Business First. “Taco Bell testing spicy Doritos Locos Tacos in Ohio.” http://www.bizjournals.com/columbus/blog/2012/09/
taco-bell-testing-spicy-doritos-locos.html?page=all
6 The Daily Beast. “Can This Taco Save America?” http://www.thedailybeast.com/articles/2013/03/12/this-taco-save-america.html
7 Local 12: WKRC in Cincinatti. “ McDonald’s Test Marketing Chicken Wings.” http://www.local12.com/content/money_alert/story/
McDonalds-Test-Marketing-Chicken-Wings/RR_Q-1a7FUWhc1QdFiW2WQ.cspx
8 Columbus Dispatch. “Wendy’s Test-Marketing New Burger on Pretzel Bun.” http://www.dispatch.com/content/stories/
business/2013/01/10/wendys-test-marketing-burger-on-pretzel-bun.html
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The Symptom: Debt, bad credit or no cash.
One third of all business owners who experience tight credit also say that existing debt
seriously constrains their ability to finance further investments, and another 44% cite existing
debt as a problem.9 Furthermore, according to a credit reference agency, 6 out of 10 small
firms have a bad credit rating.10 In other words, a lack of cash can make it tough to move your
business forward, damage your reputation and cause significant stress.
The Solution: Keep your overhead low (and increase revenue).
Cash flow problems fall into two scenarios. In the first, your initial cash investment gets tied
up in resources, leaving you with very little wiggle room. For example, if you’ve created a
line of potato peelers that cut potato-peeling time in half, you may have to turn over most of
your available cash to the manufacturer who’s fabricating those peelers. If your laptop melts
down a few days later, rendering you unable to work on your potato peeling website, you
may find it tough to come up with the funds to get yourself back online. That’s what we call
a cash crunch. The fastest way out of it is to start selling potato peelers to recoup your initial
investment. (Or, of course, the other option is to avoid this scenario from the start, but more
on that in a moment.)
Now, let’s add another layer to that scenario. Let’s say that you’re already selling potato
peelers, but you’re only making a dollar a peeler for your investment of $5. You’re still in a
cash crunch, but you’ve also gotten yourself into a trickier situation: you’ve got to move a
bunch of potato peelers to get yourself back online, fast.
New business owners see both of these scenarios with regularity and, to some extent, cash
crunches can simply be an occasional reality of doing business. However, there are a couple
of things you can do to avoid both of these scenarios entirely:
everything you can to keep your fixed monthly overhead low.
1 Do
It’s easy to fall in love with the idea of being a business owner and all of the perks that
come with your empire: an office, a staff to lighten your load, a roster of contractors
waiting to fill your every need, extensive research and creative time. We’ve all been there.
As much as you can—especially at the inception of a new venture—try to keep your
overhead low. Keep your monthly expenses to a minimum by examining your internal
operations. What do you really need this month? What can wait until next month? It
doesn’t have to be forever—and it doesn’t need to be an exercise in asceticism. If you
absolutely need an assistant to be effective, hire an assistant. But if you can forego an
assistant while you’re manufacturing your peelers, that little extra might get you the laptop
9 Score.org, “The Biggest Roadblocks to Small Business Growth.” http://www.score.org/resources/biggest-roadblocks-small-businessgrowth
10 Institute of Directors, “The Biggest Problems Facing Small Businesses Today.” http://blogs.iod.com/2010/05/19/the-biggest-problemsfacing-small-businesses-today/#.TxhKBaVfhip
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you need. It will also keep the cost of your potato peelers down to give you a little extra
profit with every sale.
You may find yourself going through cycles—growing, growing, growing, and then cutting
your costs back down to a manageable sum. Always take the time to stop and think about
the next step. Focus on providing financial freedom and security for yourself in savings. Do
not build a machine that drives over you.
your terms with suppliers.
2 Improve
Getting a better price means more available cash—and a lower cost of goods. Negotiate
with suppliers, and if you have a history or a relationship, work to improve your terms
with them. For example, you might offer to buy larger quantities for a more favorable
deal. Make sure to shop around. You’ll be surprised at the variety of the prices you can
find. Finally, don’t be afraid to be honest with your suppliers by letting them know when a
competitor offers you a lower price. They may be willing to match it for you to in order to
start a long-term relationship.
yourself: does the customer care?
3 Ask
In addition to keeping your overhead low and reducing your physical cost of goods,
it’s your job to keep all of your other costs at an absolute minimum, while delivering
extraordinary value to your customers. Sounds simple, right? :) One simple, yet effect test
is this: “Does the customer care?” Sometimes, it’s easy to add on items that you think are
delivering great value but get a mere “meh,” from the customer. Find these in your product
and cut them to boost your margins.
sure you’re charging enough.
4 Make
Price is an objective measurement of a subjective idea: what’s something worth?
Undercharging is one common way that entrepreneurs get themselves into trouble. If
you’re working with extremely slim margins on your product—as in the potato peeler that
costs you $5 to make but only makes you $1 in profit—in addition to considering how to
cut your costs, you need to ask yourself if you’re charging enough. Undercharging doesn’t
just squeeze your margins. It also has the tendency to scream “cheap!” Unless you’re a
massive big-box retailer who deals in bulk, aim for higher-value, higher-cost products.
You’ll enjoy delivering them more, and they’ll keep you from having to sell thousands of
products to recoup your investment.
Reason #3: Failure to Create a Long-Range Plan
The Problem: After their initial business plan, companies stop planning for the future.
As the saying goes, “Failing to plan is planning to fail.” Many entrepreneurs create business
and marketing plans for individual products or services, but fewer stop to create a long-range
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plan. This includes not only a 5- or 10-year view of a business, but also an understanding of
how a business can build a suite of products that creates customers for life.
The Symptom: Missed opportunity.
Many businesses focus on a single goal: selling the product at hand to a customer. While that
may keep a company afloat for the time being, the key to long-term success is creating a
suite of products meet your customers’ growing needs at varying stages—e.g., selling more
items to existing customers.
Anything else is a missed opportunity. Consider the fact that a whopping 75% of Zappos’
revenue comes from returning customers.11 Additionally studies have shown that repeat
customers spend as much as 33% more than new customers12 and that increasing repeat
business by 2% can have the same impact as cutting costs by 10%.13
The Solution: Create a strategic escalation plan.
Once you understand the target audience for your current product and what pressing need
it solves, extend your ideas to create an escalation plan. Start by understanding where this
product falls along the continuum. Is it a budget solution, a mid-range solution or a luxury
solution? To draw an analogy using cars, are you offering a Toyota Corolla, a Toyota Camry or
a Lexus?
Once you understand where that product fits, make a plan to fill in your gaps. If you’ve
got a mid-range solution, which is where many people start, what’s the next need that your
customer will have? In other words, how can you offer the next level of service to meet
him or her where she will be after using your product? Design your upsell to meet your
customer there.
By the same logic, some of your prospects may not be ready for your mid-range solution.
For now, they may need an introductory solution. This gives you the opportunity to create a
downsell. If your mid-range product is a live event, the next tier down might be an eBook.
After reading your book, that customer may find that they’re ready to grow with you. If you’ve
designed your suite of products accordingly, you’ll be primed to meet their needs at every
step—and continue to grow your business.
However, when you fail to plan for these instances, two things happen. First, you’ll
be sending customers away to your competition, who may be ready to meet their needs.
Second, by taking a longer-range view of your suite of products, you free yourself from
11 Econsultancy.com, “Q&A with Zappos CEO Tony Hseih.” http://econsultancy.com/us/blog/2955-q-a-with-zappos-ceo-tony-hsieh
12 Retail Active Business Intelligence. “Repeat Customers Spend 33% More Than New Customers.” http://www.retailactive.com/post-Repe
atCustomersSpend33MoreThanNewCustomers-4274047797547149455.aspx
13 Murphy, Emmet C. and Mark, Leading on the Edge of Chaos. Cited in: http://articles.realtown.com/2010/08/24/would-you-like-to-havemore-repeat-business/
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needing to fill every need that your customers have ever had. In other words, you give
yourself the gift of specificity, of being able to design a product for a very specific phase in
a customer’s life. It’s those products that really hit home, the ones that speak to a particular
need and solve it. The opposite, which try to speak to everything and everybody, end up
selling to nobody.
Reason #4: No Competitive Edge
The Problem: Business owners don’t understand their competitive edge.
New data shows that as many as 40% of founders of new companies don’t think that their
businesses have a competitive advantage.14 Indeed, standing out in a crowded market is one
of the most challenging aspects of introducing a new product or service. However, it’s critical
that business owners truly understand their competitive edge—and use that edge to market
and sell their products to potential customers.
The Symptom: Businesses try to stand out with competitive prices, rather than
superior products or services.
Studies show small businesses often fail to creatively differentiate themselves in the
marketplace. This stands in sharp contrast to the most successful companies who
differentiate themselves with superior customer service (78%) and higher quality products
and services (76%), they come up with creative ideas to address customer’s needs (65%) and
achieve the competitive edge with lower prices (44%).15
The bottom line, however, is that businesses who try to stand out with lower prices usually
don’t succeed. Without superior service and creativity, they lose customers either to
dissatisfaction or to even lower-priced competitors. Competing on price is a losing game for
any business, its value and its margins.
The Solution: Discover your special sauce.
When venture capitalists are deciding what companies deserve their time, attention and
money, they look for the “special sauce,” which is what that start-up does better than
anyone else in the marketplace. For example, look at the Dyson line of vacuums. They pride
themselves on producing vacuums that don’t lose suction over time. That’s a real stand-out
in the marketplace. Or look at the OXO GoodGrips line of kitchen tools. If you’ve ever used
one of their tools, you’ll know that they’re designed around making cooking easier and more
comfortable. For example, their measuring cup offers a diagonal strip that allows you to see
how much liquid is in the container without having to lean over to read the side. Genius, right?
14 Small Business Trends, “Why Do Most Start Ups Fail?” http://smallbiztrends.com/2011/09/why-do-most-start-ups-fail.html
15 Network Solutions, “The State of Small Business Report,” http://www.networksolutions.com/smallbusiness/wp-content/files/SBSI_
February_2010.pdf
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Ask yourself: What do you (and your product) do better than anyone else in the marketplace?
What do you provide that no one else does? Expand your thinking beyond product innovation.
Maybe you deliver a complete customer experience, like Zappos. Maybe you have a unique
blend of experience that gives you new perspective on a common topic.
Whatever you decide on, you need to know exactly why someone should buy from you
instead of your competition. Once you’re clear, you need to place it front-and-center in your
marketing and sales campaigns to help you attract more prospects and close more deals.
If you’re struggling to find a differentiator, take some time to research your competition.
Discover what makes them different and look for gaps in the market where you can fit. And
remember: we’ve all got our unique “take” on the world. It’s just a matter of making sure that
yours shines through.
Reason #5: Lack of a Motivated Team
The Problem: Teams that are not motivated fail to produce good work.
Thirty percent of executives claim that motivating their employees is their biggest challenge,
and this is a problem that exists in businesses of every size and composition.16 According to
the Gallup Management Journal, 70% of workers are not fully engaged.17 Even if a business
relies on a small team of contractors, uninspired people rarely produce competitive work.
The Symptom: Your team is disconnected from your strategy and your business.
A study by Harvard Business School revealed that 95% of employees do not understand
their company’s business strategy. Additionally, Seventy percent of middle managers and
more than 90% of front-line employees have compensation that is not linked to the strategy.
18
Employees need to feel inspired. Consequences of an unmotivated team include poor
performance, dissatisfaction, poor customer service, and ultimately, decreased revenue for
the company employing these workers.
The Solution: Create a clear company vision, supported by a reward system.
One of the best ways to motivate yourself into action is to reconnect with your “why.” Sharing
that “why” that gets you excited is the first step to getting your employees and contractors
engaged in your business and excited to help you produce results.
16 Entrepreneur Magazine, “Human Resources Statistics.” http://www.entrepreneur.com/article/81978
17 Gallup Business Journal, “Majority of American Workers Not Engaged.” http://www.gallup.com/poll/150383/majority-american-workersnot-engaged-jobs.aspx
18 Harvard Business School, “The Office of Strategy Management.” http://hbswk.hbs.edu/item/5269.html
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Many companies put their “why” into words by
translating it into a mission statement that guides
their actions. The best mission statements are
specific enough to direct decisions and lofty
enough to inspire each employee’s best work.
For example, consider the mission statement of
outdoor clothing company Patagonia:
“Build the best product, cause no unnecessary
harm, use business to inspire and implement
solutions to the environmental crisis.”
This statement is echoed in everything Patagonia
does, including the quality of its clothing and its
repair, resell and recycle program which aims to
keep Patagonia items in use and out of landfills.
If you want to build a ship,
don’t drum up people to collect
wood and don’t assign them
tasks and work, but rather teach
them to long for the endless
immensity of the sea.
—Antoine de Saint Exupéry
Also consider Starbucks’ mission statement:
“Our mission: to inspire and nurture the human
spirit – one person, one cup and one neighborhood
at a time.”
It explains pretty succinctly why Starbucks does so much to create an atmosphere around
their coffee. It’s less about the actual drinks and more about the experience Starbucks
creates, which includes building welcoming stores with curated music and free WiFi,
encouraging the customization of every drink to each customer’s specifications and offering
its workers more healthcare options than many part-time employers. In other words,
Starbucks is about way more than just a $5 cup of coffee, and it all starts with their
mission statement.
What’s your mission statement? What’s driving everything that you and your company do?
See if you can capture it in a sentence. Post it somewhere you can see it—and share it with
everyone you work with. In addition to driving your decisions to help you build a cohesive
company, a mission statement will also inspire your team toward the same goals and motivate
them to produce better work.
However, be aware that motivation in the form of inspiration isn’t enough to sustain a
team over the long-term. Be clear in your expectations and make sure you reward each
member personally—both verbally and financially—when he or she delivers a quality result.
Let all of them know that they mean something to you and your business. You’ll end up with a
team that’s both aligned with your mission who loves to give back to you and your customers.
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Reason #6: No Clear Lead-Generation System
The Problem: Without lead generation, people cannot find your business.
Too many businesses focus exclusively on creating great products and not enough on getting
those products in front of the potential customers who need them. Most of the time, people
don’t just “stumble upon” products or services that change their lives. These customers
are usually targeted and closed by businesses with directed, cost-efficient lead generation
systems that consistently attract new potential customers to the business.
The Symptom: The business generates few leads, and therefore generates weak sales.
Marketing and sales is a numbers game. The more leads a business can bring in the door, the
higher its potential sales can be. The impact of marketing is hard to argue: businesses with
five or fewer landing pages or offers have 10 times fewer leads than those with 40 or more
landing pages or offers.19
The Solution: Create lead-generation systems that you measure on a consistent basis.
Ultimately, the number of leads you bring in the door is one metric out of several that
determines the health of your business. However, it happens to be a crucial metric that you
need to monitor consistently, one that goes straight to your bottom line. That’s why getting
more leads into your business needs to be one of your #1 priorities as a business owner.
The most successful companies share these three lead-generation best practices:
constantly investigate new channels.
1 They
Tying yourself to a single lead-generation channel—such as Facebook ads or organic
search—is a precarious proposition at best. All it takes is one change in terms of service,
one new search algorithm (Google Panda, anyone?) or a shift in the marketplace and
your can pipeline dry up in an instant. Diversifying your lead sources will ensure that your
business is set for the long term.
Additionally, focusing on a single channel may keep you from an entire group of prospects.
Different demographics have their individual preferences. When landing consulting clients,
some of your prospects may prefer meeting you face to face at a networking event rather
than getting introduced through LinkedIn. Trying SMS marketing may open up a whole
new base of prospects that you wouldn’t have reached otherwise. In summary, utilizing as
many channels as possible, both online and offline increases the possibility of linking you
with a new lead.
19 Econsultancy, “The Inbound Marketing Explosion.” http://econsultancy.com/us/blog/9408-the-inbound-marketing-explosion-infographic
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measure their results.
2 They
As you experiment with new channels, it’s vital
that you measure your results so you know what’s
working. For each different initiative, you need to
know how much it costs you to acquire a customer.
For example, if you send 100 pieces of direct mail
that cost you $2 apiece (for a total of $200) and
you close 5 leads from that mailing, your cost
per customer is $200/5 or $40. Consider that $40
alongside the profit you’re making from your product.
Is that channel is “working” for you? If it’s selling for
$1,000, that might be worth the investment. If your
product is selling for $100, probably not. If not, get
rid of that channel and try another one.
What’s measured improves.
—Peter Drucker
Also, keep in mind that effective lead generation is about quality more than quantity. A
source that gives you fewer leads that convert more often is worth more than a source
with 10,000 leads who never buy.
By keeping these principles in mind, you’ll soon find a couple of profitable channels that
deliver the right leads to you at the right price.
put in place long-term systems in place to produce repeatable results.
3 They
The strongest lead-generation systems are just that: systems. A system is something
that’s executed consistently and produces consistent results. Once you measure which of
your channels is working, automate it as much as possible and follow up consistently on
the pieces that require your individual attention. This will free you up as much as possible
while making sure your business is supplied with the consistent stream of new leads it
needs to thrive.
Reason #7: Weak Sales
The Problem: Weak sales stunt growth.
Getting leads into your business is only half the job. You also need to turn them into
customers. Pinpointing the exact cause for slow sales is sometimes tricky. Some experts
point to lack of follow up in sales teams. In today’s market, as many as 48% of sales
people never follow up with a prospect, and only 12% of sales people make more than
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three contacts.20 Others point to the fact that some companies focus more tightly on trickier
outbound marketing than more cost-effective inbound marketing, which often yields
better results.21
The Symptom: Everything seems to be in place, but the product isn’t selling.
Your lead generation efforts are working well, but you can’t seem to make your sales goals.
Traffic is high, but conversion rates are disappointing. Potential customers are putting their
eyes on your product and walking away, despite repeated follow-up from the sales team.
You’re simply not gaining new customers, no matter what you try.
The Solution: Examine your offer.
When you have plenty of leads coming into your business but very few of them are becoming
customers, it’s time to examine the #1 reason that products don’t sell: your offer. Putting
together a killer offer is tricky. It often takes a bit of trial and error, which is why testing is so
crucial to discovering what will resonate with your audience and entice them to buy.
As an entrepreneur, you have the advantage of being able to be nimble. Large
corporations can’t shift their strategy on a dime, but you can. There’s no need to follow an
offer that’s not working off a cliff like a lemming. If your offer isn’t working, tweak it. Try it out
on a new group of leads and see how they react. If that tweak improves sales, keep it, then
start a split test and create a new offer. A couple of experiments later, you’ll end up with an
offer that’s much more attractive to your target audience.
When you’re looking for places to tweak, consider the following reasons why your offer may
be falling flat:
not clear what you’re offering.
1 It’s
The adage is true: “The confused mind doesn’t buy.” People are looking for certainty when
they buy something: certainty that they’re going to actually receive what you’re offering
them, certainty that your product will improve their lives and certainty that they’re getting
value for their money by choosing you. Any cloudiness that surrounds your offer needs
to be cleared before someone will hand over a credit card. This is especially true if you
happen to be selling anything over the Internet. If your customers can’t see and touch your
product, it’s critical to be crystal clear what you’re offering for the investment.
20 Follow Up Success, “Shocking Sales Statistics as It Relates to Follow Up, “Shocking Sales Statistics as It Relates to Follow Up.” http://
www.followupsuccess.com/2011/02/21/shocking-sales-statistics-as-it-relates-to-follow-up/
21 HubSpot, “ 20 Fresh Stats About the State of Inbound Marketing in 2012.” http://blog.hubspot.com/blog/tabid/6307/bid/31550/20-FreshStats-About-the-State-of-Inbound-Marketing-in-2012.aspx
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not enough obvious value.
2 There’s
People want to feel like they’re getting value for their money and, in most cases, people
want to feel as though they’re getting value over and above what they’re paying. Often,
when it comes to a value discrepancy within an offer, it’s not that your product doesn’t
have the value, but more that the value is hidden or poorly presented. If you want people
to run to the front of the line to get your product, don’t be shy. Show them the value
they’re looking for.
don’t trust you.
3 They
In our Internet-based marketplace, trust can be hard to come by. Put yourself in your
customer’s shoes. What will make them trust you enough to offer their hard-earned
money in exchange for what you’re offering? Sales psychology can offer you a number
of techniques to build trust, but there’s one that’s easy to implement and execute: social
proof. There’s no need to prove how trustworthy you are on your own. Let your previous
customers—or your test group—speak for you. Gather testimonials from your previous
customers and make them prominent wherever you’re delivering your offer. Videos are the
most powerful, but written testimonials with pictures will go a long way toward establishing
trust. Add a few to your website or your next presentation and discover how powerful
social proof can be for strengthening your offer.
Reason #8: Lack of Focused Leadership
The Problem: The business lacks strong leadership.
Some would argue that businesses fail not necessarily because of external factors but
because of bad leadership. According to Forbes, lack of character, lack of vision, poor
branding, lack of execution, flawed strategy, lack of capital, poor management, lack of
sales, toxic culture and lack of innovation can all be attributed to the failure of a leader to
successfully spearhead the business, and not the failure of the business itself.22
The Symptom: The business veers wildly all over the place and loses focus.
While some business owners are so committed to their offers that they’ll let their business
die a slow death before engineering a change (see above), others experience the opposite
problem: entrepreneurial ADD. They’ll try one strategy and when it doesn’t work, they’ll
quickly abandon it for another. Sometimes, this tendency becomes so extreme that an
entrepreneur will begin working on an entirely new business idea while the first one is still in
its creation phase. This kind of behavior bewilders their teams, confuses their prospects and
leaves the entrepreneurs themselves frazzled and unsure where to go next.
22 Forbes, “Businesses Don’t Fail - Leaders Do.” http://www.forbes.com/sites/mikemyatt/2012/01/12/businesses-dont-fail-leaders-do/
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The Solution: Focus first, then diversify.
As we noted earlier, the nature of business is uncertainty. It’s only natural for you to feel
some doubt or fear as you pursue a new business idea. It happens to even the most daring
entrepreneurs. Today, an idea like Amazon.com seems like a no-brainer, but when Jeff Bezos
left his Wall Street firm to start Amazon, he struggled with some serious doubts. And even
today, as Amazon continues to innovate new services, Bezos is still faced with uncertainty,
but instead of completely abandoning one idea in favor of another, he combats uncertainty
with smaller, focused innovation projects. In his words:
“If you invent frequently and are willing to fail, then you never get to that point where you
really need to bet the whole company. Amazon Web Services [Amazon’s cloud solution] also
started about six or seven years ago. We are planting more seeds right now, and it is too early
to talk about them, but we are going to continue to plant seeds. And I can guarantee you that
everything we do will not work. And, I am never concerned about that.”23
The main difference between entrepreneurial diversity and entrepreneurial ADD is this:
Bezos never abandoned his original vision of selling books online. As he said, “We’re
stubborn on vision, but flexible on details.”24 He continued to devote the necessary resources
to marketing and growing the business, while adding more diverse lines that complimented
his original business. Today, Amazon is the largest online retailer and continues to be a large
player in the print book and eBook industry.
Before you abandon your big idea, ask yourself if you’ve devoted the necessary resources
to see your vision flourish. Have you let fear or uncertainty keep you from getting out there
in a big way? It takes courage to stick with your idea in the face of doubt, but your business
deserves all the confidence you can muster.
Reason #9: Not Retaining Customers
The Problem: New customers are harder and harder to come by.
As little as ten years ago, it took shoppers 5.2 days to make a big-ticket purchase. Today,
it takes them as many as 10.3 days, on average.25 Prospect conversion rates also speak
volumes about the challenges of bringing new customers into your business. 2% of sales
are made on the first contact, 3% on the second contact, 5% on the third contact, 10% on
23 Innovation for Growth, “ When Should You Give Up on an Idea?” http://timkastelle.org/blog/2011/06/when-should-you-give-up-on-anidea/
24 Kissmetrics, “12 Business Lessons You Can Learn from Amazon Founder and CEO Jeff Bezos.” http://blog.kissmetrics.com/lessonsfrom-jeff-bezos/
25 Follow Up Success, “ Shocking Sales Statistics as It Relates to Follow Up.” http://www.followupsuccess.com/2011/02/21/shockingsales-statistics-as-it-relates-to-follow-up/
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the fourth contact, and 80% on the fifth to twelfth contact.26 In other words, attracting new
customers to your business involves a significant output of time and energy.
The Symptom: Customer attrition and countless missed opportunities.
Failure to nurture current customers is one of the biggest mistakes that a business can make.
Businesses who don’t take care of their customers see lower customer service satisfaction
rates, lose of customers to competition and miss countless opportunities for repeat business.
Since the cost of acquiring customers is high, it’s absolutely crucial to have the mechanisms in
place to retain current customers and make them an ongoing part of your growing business.
The Solution: Measure your customer retention—or change your strategy.
As we discussed earlier, measuring your marketing and sales process is paramount to your
success. When it comes to retaining your customers, you need to employ the same kind of
rigorous measurements to determine where you’re losing your customers and what you can
do to prevent this from happening.
Focus on actionable metrics. We suggest monitoring your numbers in the following core areas
to keep a pulse on your customer satisfaction:
How many people signed up for your program?
1 Registration:
This is the baseline number that you’ll measure your other numbers against.
How many people logged in, or activated their account with
2 Activation/Interaction:
you or interacted with your product?
Customers can’t experience the transformative power of your product if they don’t use it.
Ideally, you want this number to be as high as possible. By finding ways to make it easier
for your customers to dive in and start using your product, you’ll get them closer to seeing
the results that will turn them into customers for life.
How many people registered, activated, and stayed to become recurring
3 Retention:
paying customers?
This can take the form of a continuity program, an escalation model or a re-purchase.
In other words, who not only used the program, but also went back for more? Getting
continued business from current customers is a significant source of revenue that many
business owners overlook.
26 Management Today, “Finding New Business the ‘Biggest Challenge’ Facing Organisations in 2013.” http://www.managementtoday.co.uk/
features/1165388/sponsored-finding-new-business-biggest-challenge-facing-organisations-2013/
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How many people referred somebody else to your business?
4 Referral:
This is the ultimate sign of a truly happy customer. People generally only recommend
services they absolutely love, so referrals are a sign that you’re hitting it out of the park.
How many people returned your product and requested their money back?
5 Return:
A “good” return rate varies from industry to industry, but suffice it to say that you want to
keep this number as low as possible. Although it’s important not to dwell on it as a sign of
failure, knowing your return rate is important to understanding the health of your business.
You may find that your metrics indicate a problem with your product, and not just a
problem with your sales or retention systems. For example, you may see a high number
of people using your product, but you may still have a high return rate. Don’t dismiss these
numbers. If this is the case, it may be time to make a change in your product strategy.
If you can, elegantly follow up to discover why those customers returned your product.
Pay close attention to the answers your customers give. If your product didn’t meet their
expectations, use this information to continue to fine-tune your product, tweak your sales
and marketing process and uncover the perfect marriage of product and customer. Were their
problems one that could have been solved by a customer service team prior to the return?
It’s crucial to take good care of your customers after the sale. Make sure you have in place
a system to address customers’ needs and questions. It’s absolutely worth the short-term
investment. In addition to keeping your return rate low, effective customer services also
creates happy, long-term, repeat buyers.
Why Businesses Succeed: Commitment to Improvement
The easiest way to avoid failure is to commit to improving your business constantly. Educate
yourself about new strategies. Try them with courage and with the intention of measuring their
degree success. Monitor what’s happening in your business using the above metrics. Don’t
be afraid to tweak your strategy for results. Most importantly, listen to your customers. Often
times, they’ll tell you everything you need to know about how to improve your business and
which direction to seek next.
When you combine 1) a genuine interest in creating a superior product with 2) the business
strategies that foster success and 3) the tools to measure those results, you’ll easily overcome
these nine challenges. The result? You’ll be the proud creator of a product and a successful
business that you love.
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For Further Reading…
To learn more about the strategies and solutions behind business success, we
suggest the following books:
The E-Myth Revisited
by Michael Gerber
http://www.amazon.com/E-Myth-Revisited-Small-Businesses-About/dp/0887307280/ref=s
r_1_1?s=books&ie=UTF8&qid=1364928601&sr=1-1&keywords=The+E-Myth+Revisited++b
y+Michael+Gerber
The Lean Startup
by Eric Ries
http://www.amazon.com/Lean-Startup-Entrepreneurs-Continuous-Innovation/
dp/0307887898/ref=sr_1_1?s=books&ie=UTF8&qid=1364928541&sr=1-1&keywords=The+
Lean+Startup++by+Eric+Ries
Blue Ocean Strategy
by W. Chan Kim and Renée Mauborgne
http://www.amazon.com/Blue-Ocean-Strategy-Uncontested-Competition/dp/1591396190/
ref=sr_1_1?s=books&ie=UTF8&qid=1364928581&sr=1-1&keywords=Blue+Ocean+Strategy
++by+W.+Chan+Kim+and+Ren%C3%A9e+Mauborgne
Emotional Intelligence
by Daniel Goleman
http://www.amazon.com/Emotional-Intelligence-10th-Anniversary-Matter/dp/055380491X/
ref=sr_1_1?s=books&ie=UTF8&qid=1364928626&sr=1-1&keywords=Emotional+Intelligenc
e++by+Daniel+Goleman
The Effective Executive
by Peter F. Drucker
http://www.amazon.com/Effective-Executive-Definitive-Harperbusiness-Essentials/
dp/0060833459/ref=sr_1_1?s=books&ie=UTF8&qid=1364928651&sr=1-1&keywords=The+
Effective+Executive++by+Peter+F.+Drucker
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