There are many reasons a small business may fail. That likely is no surprise, but what may come as a surprise is that some fail because they are actually successful.
Entrepreneurs succeeding sometimes let their success control and lead them, rather than choosing to lead their business. Unfortunately today’s good news is not necessarily tomorrow’s – just because things are going well now is no guarantee it will continue.
Some big picture insight may help put things in perspective.
According to Industry Canada, in 2012 there were 1.08 million small businesses - defined by having at least one employee in addition to the owner but fewer than 99 employees.
And how are upstart businesses fairing?
The survival rate in making the first anniversary has taken a beating over the past decade. Whereas ten years ago about 95% of new businesses made it past year one, the 2012 stat is down to 80 per cent. Fortunately, if a business does make it initially, the survival rate at year five remains at about 70%.
So, how might a business owner increase the odds of survival?
Whether operating a new venture, an established enterprise or a fledgling business, my suggestion is to have a business plan. “Failing to plan is planning to fail” is a truism, but ironically “truism” is defined as knowledge that is so commonplace it is often ignored or even perceived as meaningless.
Writing things down creates clear commitment therefore increasing the odds of completion and, by default, success, so put pen to paper.
The planning process requires research and, just as importantly, honesty. Question everything. Identify strengths and weaknesses of the business and of oneself. Define opportunities and threats within the marketplace and the economy. Doing this means the business owner can make informed decisions and set realistic goals.
Although the process may appear complex, it actually isn’t when broken down into steps. Good info and guidance are on-line. There is the option of working with a professional - be open-minded but remember, maintain ownership of the vision.
In the end, a business plan includes the marketing plan (product, price, promotion, unique selling proposition, competition), the operations plan (people, production, equipment, facilities), and the finance plan (at least a three year projection).
So the business plan is in hand. What’s next? – Implementation, evaluation, and more than likely, adjustment as time passes. In actual fact, the term “business plan” is a misnomer. What in fact has been learned and developed is “business planning” – a never ending organic process mapping the path to business success.
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him at ron.clarke@JBSbiz.ca. To read previous Tax Tips & Pits columns visit www.JBSbiz.net.