No one sets up a business to fail, yet many businesses do.
Data on business survival rates on the U.S. Bureau of Labor Statistics website indicate a 20.4% average one-year failure rate for businesses that opened their doors from 2013 to 2021 and a 49.22% average five-year failure rate for companies that opened their doors from 2013 until 2021. Assuming these figures are universal and statistically valid, this implies one in five businesses fails after one year while one in two fails after five years.
Business success is hard-won. Talk to your business consultants in the UAE, and they’d tell you this is true. Entrepreneurs start out envisioning rapid growth and recognition for their new venture, but only a few make it.
That said, there are things you can do to achieve better results and improve your chances of beating your one-year and five-year odds of failure.
You have a sterling business idea, or do you? No serious businessman proceeds on a hunch. Test and prove your idea by conducting a feasibility study.
A feasibility study will tell you whether or not your business idea is worth pursuing. Engage the services of a business advisor; they can provide you with an in-depth analysis of your business idea’s technical, financial, legal, operational, and market feasibility, among others.
Create a Business Plan
Failing to prepare is preparing to fail. Benjamin Franklin said that, and it’s true. Your likelihood of success drops when you venture without a clear plan for achieving your goals.
Do not go into business without a plan. If the feasibility study conducted by your business advisors establishes that your business idea is feasible, go to step zero. Create a business plan.
A business plan is your business roadmap or blueprint. It operationalizes your business goals and gives you a marketing, financial and operational roadmap to follow.
It has two types of audiences. Internally, it guides the company so everyone, especially the company leadership, can remain true to and anchored to the organization’s goals. Externally, investors can use it to assess the viability of a business and decide if it’s worthy of investment.
Hire the Right People
Make sure you have competent staff to help you achieve your business goals. Choosing and hiring the right people is particularly crucial during your business’s incubation stage.
When starting a business, you need trustworthy, passionate, flexible, and versatile people. There will be a lot of fires to put out and a lot of maneuvering to do in the early stages, so you need people who are willing to roll up their sleeves, put in the time, and work where and how they’re needed.
Create Standard Operating Procedures
Note how large restaurant chains can maintain their product and service quality regardless of how big they’ve grown and how many new markets they’ve expanded to. Standardization is the secret to such consistency.
You, too, must put standardization to good use. Operationalize your preferred way of doing things — i.e., your standards — by creating standard operating procedures (SOPs).
SOPs will ensure your company can continually produce products or provide services at the quality your clients or customers expect. They ensure your compliance with regulations so you don’t run afoul of the authorities.
Finally, SOPs safeguard business continuity. With SOPs in place, even if a core employee vacates his post, someone could take his place and take over his duties by simply following the job’s SOPs.
Risk is inevitable in any business. For example, the theft of customer records, product designs and employee data can destroy your new venture, eroding customer loyalty and generating relevant costs.
To mitigate this risk, you can get business insurance. Note, however, that not all insurance policies are the same. Some will not cover data breaches and cyber losses, which is what you need to recover lost data and cover the costs related to lawsuits and remediation.
Therefore, covering your business against risks takes more than just obtaining business insurance. In fact, it’d be best if you prioritize the following three things over insurance.
- First, get an internal audit of your organization’s governance, risk management and internal control processes. You want to know if your business is operating as it should, employees are doing their jobs, and your organization is complying with its regulatory obligations.
- Second, get an IT audit. This will assure you that your IT infrastructure and security processes, policies and controls adhere to industry best practices.
- Third, obtain your risk advisors’ help and formulate an enterprise risk management (ERM) strategy. ERM not only gives you a clear picture of your risks and how to mitigate them but also informs you about the depth, length and breadth of the impacts of these risks, ensuring you can prioritize risk mitigation strategies accordingly. ERM will also improve your capability to manage and mitigate insurable and non-insurable risks.
Getting your business consultants involved will help you ensure any risk mitigation measures you implement are on point and will protect you as intended. They can even help you decide on the right business insurance.
Invest in Yourself
You will most likely see a lean profit margin when you’re just starting out. Even so, make sure to put your money toward growing your business.
Redirect your revenues back to your company. It is crucial for you to invest in the growth of your company so you can maximize your growth momentum.
Successful startups are capable of pivoting as needed. An alert response to developments in your business model or product will help your business grow fast.
The ability to adapt quickly and change allows you to test various approaches to determine what works best. Fail early so you can easily pick yourself up and keep trying other strategies.
Satisfy Your Customers
Your customers’ perceptions can make or break your business. By delivering high-quality products and services, you will win brand ambassadors to sing your praises to their network of friends and acquaintances. Unfortunately, they are even more likely to talk about you if you mess up.
Therefore, deliver on your brand promise — always. No ifs, no buts, no excuses.
Get Transaction Advice
When you are about to make a big decision — e.g., purchase or sell off assets, take over another company, offer equity to investors, or borrow money — get guidance from transaction advisors. They will help you ensure the transaction is structured correctly and according to your best interest.
Set Your Business Up for Success
Succeeding in business is no easy task. That’s why only one in two companies survives the five-year mark. You can improve your chances by preparing well, mitigating risks, ensuring customer satisfaction, abiding by and operationalizing best practices, and getting guidance from business consultants.
Mini Madhavan is a Management Consulting Partner at Affility, a comprehensive advisory services firm assisting clients in the UAE and worldwide with IT, risk and management consulting solutions. A specialist Audit and Consulting Professional with over 12 years of experience, Mini is an EY alumnus, a Fellow Member of ACCA who helps Entrepreneurs and Business leaders to accomplish their business goals by planning, optimizing and implementing their business processes.