Two significant contributors to small businesses success or failure are management ability and economic conditions. The first, as a business owner you can control; the second you can’t – but you can still be informed and strategic in how you respond.
Key considerations as a business owner are; do you have experience in the industry your business is in and can you effectively time management and delegate. Far too often entrepreneurs get in their own way by not recognizing their weaknesses, not paying attention to the business plan and repeatedly hiring the wrong people.
The good news about management skills and abilities is that these are areas that you do have control over. Good preparation in the form of a well-developed business plan and marketing strategy along with an accurate pricing model can increase your chances of success. That being said, the key reasons for business failure in relation to business management is improperly stated financial needs (inadequate financing or too much debt) followed by poor cash flow management. Surrounding yourself with key employees or external professionals that bolster your limitations is a smart start. Having solid management in place will allow many small businesses to survive in difficult economic periods, but the entrepreneur must be aware of what is going on inside and outside of their business.
Research indicates that the most common external reason for business failure is economic conditions outside of your control. Examples of economic conditions outside of the entrepreneur’s control can be changes to government regulation, changes to international trade and weather conditions to name a few. Did you know that when unemployment rates are high, business failures increase; when interest rates go up business failures have a tendency to increase within 2-3 years of the interest hikes and adversely when the GDP goes up business failures decrease.
A big part of your job, as an entrepreneur, is to externally monitor the economic conditions so that you can be strategic in your decision making. Being poised to respond to the opportunities and challenges posed in your local and global market place instead of reactionary can improve your business success.
Jolynn Green is Executive Director of Community Futures Central Island. You can count on us for sound practical advice, personalized business coaching and tailored financing that supports your business goals. Jolynn can be reached at email@example.com or 250-591-7499.