By: Brianna Valleskey
I work with a lot of small- and medium-sized businesses that all want the same thing: growth. And that’s great! Growing your business means serving more customers, creating new jobs, generating innovation and, of course, increasing the bottom line. But, this is also where I see a lot of companies start to fail.
We know that failure is common among small businesses. According to the Small Business Association, about two-thirds of businesses with employees (not sole proprietorships or “solopreneurs”) survive at least two years, and almost half survive at least five years. Often-cited articles from outlets like The New York Times, Forbes and Inc. document the numerous reasons many business fail: dysfunctional management, slow or stagnant cash flow, financial illiteracy, poor value proposition, lack of cash cushion, operational flaws, low demand for the product or service … the list goes on.
There are a few areas, however, that I feel like haven’t been discussed at length. These observations come directly from companies I’ve either worked with or worked at, some of which are absolutely killing it. Others, not so much. Here’s what I’ve learned from being on the front lines of multiple SMB companies.
3 Things that will Absolutely Run Your Small Business into the Ground
1. Try to do too many things at once.
Successful business growth involves a lot of moving parts, including a well-oiled lead generation funnel, a fluid sales process, strong customer retention and (of course) a strong value proposition for your product or service. The trick is that you can’t perfect all of those things at once. I know of a software company that was constantly struggling to communicate their value prop, while also trying moving upmarket, expand their product and reduce customer churn. The result? They couldn’t do any one of those things well because the company lacked focus. In addition, they lost almost half of their employees ― some were voluntary departures after being overworked; others were laid off due to the company’s poor performance.
I also know of a company that has a 98 percent retention rate with high-profile customers like Uber and Paypal. I kid you not. This CEO waited for years to perfect his company’s product and implementation process so he could ensure customer success. If you don’t believe this method works, just look at Slack. The company started building their product in December of 2012, launched a beta version (they called it a “preview release) in May of 2013, and then finally launched to the public in February of 2014. Slack spent 14 months perfecting its product. As a result, its become one of the fastest-growing companies in the market.
2. Undervalue your employees.
You can have the best product in the whole world; but if you don’t have good employees to market the product, close deals with the right prospects, serve your valued customers or iterate on the product, you do not have a business. And you will not make money. I won’t even go into the fact that a service business is based entirely on the performance of its employees. Another company I’m familiar with brought in a majority investor that completely changed the company culture. They rid the company of anything that didn’t have to do with business operations, especially anything that resembled “startup culture” (or an immature culture, as I imagine they viewed it). No more autonomy. No more monthly company roundtables. No more team-building events. No more beer Fridays. No more ping pong during office hours. Oh, and office hours were strictly defined as 8-5 or 9-6. The company culture soon became dry and lifeless. People starting leaving. Multiple employees voices their concerns to management, but soon most of the management was leaving, too. The concerns then fell on deaf ears. To my knowledge, they still are. And the business is not doing well.
You don’t have to take my word for it. Look at Uber: After blatantly ignoring employee complaints of its employees, the company suffered a public relations disaster of epic proportions when those employees went public with their stories (examples here and here). Some of the companies I work with, on the other hand, understand the deep value of investing in your employees. They treat the company as a horizontal organization and value each individual’s point of view. Those organization are growing like crazy. Seriously. One of them is even on Inc.’s list of fasting-growing companies in the country. And it’s all because they treat their employees like the most loyal customers. In return, the employees are happy to come to work, be productive and take part in such an enthusiastic atmosphere. Sir Richard Branson was right: “Take care of your employees, and they’ll take care of your business.”
3. Underinvest in proper marketing.
I know this part seems totally biased because I’m a marketing geek. But hear me out. In the age of endless information, marketing is the number one way to get your product noticed. It involves understanding your buyer, the problems your company solves, the problems it doesn’t solve, and its unique value proposition. I once spoke to a business with an innovative product. But the company had never invested in marketing. They thought that once they built the product, they’d build brand awareness and people would start buying. You know who else built brand awareness? TiVo. You know who’s stock has decreased 85 percent since reaching its peak over a decade ago? TiVo. The company spent so much time building a brand that they forgot to create their category. People understood what TiVo did, but they didn’t understand why they needed it.
I can’t think of a single person I know who uses (or even owns) a TiVo. You know almost everyone I know has? Netflix. TiVo let you watch what you want, when you want. Netflix lets you watch what you want, when you want. But consumers didn’t know they wanted that until Netflix embarked on a rather brilliant marketing scheme of creating exclusive content. Now, we can’t live without it. More people are cutting the cord on cable and relying exclusively on streaming services like Netflix. People used to say they were going to “TiVo” something. People now say they’re going to “Netflix” and chill. Another note I need to make in this section is that I see a lot of companies leave marketing in the hands of people who are not competent. It’s as if marketing is viewed more as a side function, rather than an imperative driver of brand awareness, lead generation and customer acquisition. Hire marketers who can craft strategic campaigns and measure their results ― especially ones who can write well. When your messaging is clear, your sales go up.
These are just my thoughts based on experiences I’ve had working with SMB companies. I’d love to hear your insights, too. Feel free to leave a comment below, or check out some of my favorite books on business and marketing.
Fearless Thoughts are my insights on marketing, entrepreneurship, growth, mindfulness, creativity and whatever else comes to mind on any given day. Writing is how I make sense of the world.