You set yourself up for failure when you haven’t done your due diligence or just basic foundation work. Sure, if you’re going to go big, you want to find out if your idea is going to work. And if it’s not, you want to fail fast, correct to conquer and share your learnings.
Failing fast is a fair strategy if you have it built into your operational mindset. Building an operation that expects failure is one thing, but the heart of it needs to be agile, creative and ever changing.
Part of establishing an operational mindset, built to pivot quickly, means anticipating failure and figuring out what to do when those situations pop up.
According to the US Bureau of Labor Statistics, just half of small businesses see their fifth birthday. Here are three things that result in business failure and what to do when they happen to you.
You run out of cash
Cash flow is critical to business success. Without ample cash runway, you can’t execute on your idea. You can’t pay your staff or your bills. It’s an issue that needs attention before it sinks your business. After all, a company can make a loss many times but it can only run out of cash once.
The simplest way to get a hold on cash flow is to use cloud-based accounting software that’s directly integrated with your financial institutions so you can get a real-time overview of your business’ position. Having a clear perspective enables you to monitor expenses and keep track of invoices and payments.
Strict cash flow management isn’t as sexy as making a big sale, or scoring a round of financing, but business owners who more effectively manage their cash flow can gain a notable advantage on their competition.
You don’t connect with your customers
Customers are the one thing every single successful business needs. To write revenues, you need to be able to sell your wares. To sell your wares, you need to offer a product or service that meets a need. How do you keep up with changing consumer trends and new opportunities if you’re not regularly in contact with your target market?
Taking the time to talk to your customer, understand what works for them and what their pain points are, can help you flag if your product or service is starting to slip.
You haven’t got the right team
If you look at all the world’s more recent business success stories, people are at the heart of everything they do. Hiring the right talent to execute on a mission is critical to business success.
But it takes more than hiring the right people, those teams need to be empowered by leaders who truly understand a company’s vision. Leadership dysfunction can result in poor retention rates and sub-par decision making – two issues which lift failure risks.
As a founder, small business owner or team manager, this company is your baby. You need to nurture people and provide the best environment you can so they may thrive.
Thinking about how you will handle issues that have the power to topple your business before they happen is one way to fail fast and survive, rather than failing completely and losing your business.