The reason why some business ideas in the SME sector fail to take off has a lot to do with the lack of knowledge of how to run a business. knowledge of how to run a business, as well as failures in choosing the right tools to keep their operation running smoothly, as well as failures to choose the right tools to keep their entire operation in order.
This is according to figures from studies such as the Global Entrepreneurship Monitorwhich shows how in recent years the number of SMEs and Startups that fail before reaching the age of five years comprises 70% of businesses created in the Latin American region.
Below we share three reasons why SMEs fail that the team of consultants of InterFuerza compiled in the last 5 years serving businessmen and entrepreneurs in Latin America. We also add a list of actions to prevent this from happening to your business.
It does not keep accounts or control its finances.
The main constant of entrepreneurs and small business owners is the lack of financial planning. lack of financial planning.. And is that keeping accounting control not only stops at reviewing our profit; every movement of purchase, sale and investment must be linked to its economic impact to ensure the profitability of the business.
Video: Are Entrepreneurs Afraid of Finance?
What should I do?
Every business should start by planning its budget and keeping track of all its costs. Once you manage your Revenue, Accounts Receivable (AR) and Accounts Payable (AP) information, you will be able to generate automatic financial reports that will allow you to respond accurately when making decisions:
- Monetary value of your product or service, do the prices I have assigned generate profit?
- Investment in equipment, systems and human talent, are these costs in line with the return on investment I need to generate to cover expenses? Am I instead investing less than the minimum to generate results?
- High expenses versus low income, is there a way to cut back on expenses and focus on resources that will generate a return?
You know very little (or almost nothing) about your consumers.
The next leading cause of loss is poor knowledge of what your customer expects, methods of acquiring feedback on products and services, as well as poor follow-up on sales opportunities that required more information.
What should I do?
Instead of expecting to generate more sales and revenue for the sake of it, use feedback from your direct consumer to create a good customer experience.
- Have I conducted market research or outreach to potential customers? Exercises such as a focus group with potential customers will help you get feedback on costs, features such as packaging and suitable offers for your product.
- Generate a marketing plan with tools such as a buyer persona buyer personaIs your product offering attractive enough for this potential buyer?
- Evaluate your relationship with current customers, what follow-up or relationship could you adopt to make this customer make new purchases or refer my product to other users?
It doesn't build effective teams that work on their own.
He who embraces much, squeezes little. The mistake of many small business owners and entrepreneurs is to accumulate multiple tasks on themselves instead of delegating smaller tasks to specialized work teams in that operation.
Learn how to coordinate your sales team.
What should I do?
Even if the business has started with your individual work, the time will come to build on this start with more specific activities to improve your sales processes, strategic planning, customer relations, among others.
- Do I have the tools to monitor and allow an automated work to my collaborators?
- Security measures, permits
- Aiming for the success of its employees, training and learning spaces to improve their work.
Accompany your strategies with the right technology
Each of these processes - finance, marketing and human talent - will allow the development of strategies that best accompany your growth.
In addition to this, it will be vital to reduce the time spent on manual actions with little impact, and make the switch to automated processes thanks to specialized management systems for SMEs.
The business tactics and technologies you can add to your business will provide you with both new opportunities and the answer to growth opportunities if you fix the mistakes mentioned above. That's why it will be vital that you take your role as a leader of the changes that will lead to the continuity of your business in the short and long term.