It’s true that small businesses are forced to close their doors every day, but you don’t have to become a part of that statistic. If you think bigger and plan for growth, then you may be able to prevent your small business from fizzling out in the first couple years.
The keys to remaining profitable are scalability, assurance of operating capital, and constant innovation. It may not be the holy trinity of success, but these tips will make sure you’re ahead of the game.
Is it scalable?
No matter what you’re selling, you’re far more likely to have long-term success if your business has the continual ability to scale-up because if you reach a point where you are not reaching any new customers, there’s a good chance it will fail.
You might have to get creative to position yourself for growth down the line, since not all businesses are naturally scalable. For example, a restaurant or local construction supplier is fueled regionally, whereas an online seller usually has the potential to continue reaching new customers pretty much anywhere.
That doesn’t mean that those companies are guaranteed success, by the way; just because the model is scalable, it could still fail like any other company if there is not a great product.
What can you do to create a scalable business model?
So how do you transcend the seeming limitations of a local small business and break through the plexiglass ceiling? You have to find ways of extending your reach to customers outside of your existing market and adapt your business model.
Obviously, one of your most valuable assets for growth is the Internet. Whatever your product or service is, there’s a good chance you can sell it online, instantly extending your market to anywhere in the country, and even worldwide (of course that will require a concurrent expansion of infrastructure).
Are you selling products out of one brick-and-mortar shop? Create an ecommerce website to sell your product online, and you’ve got a whole new ball game.
If a product does well in one locality, that doesn’t mean it will necessarily do well everywhere, which is why it’s a good idea to do some market research and add products for which there is a demand.
Do you have enough capital to get through the lean times?
Revenue is tricky, and if you’re like most small businesses, you will experience peaks and valleys. Every business owner knows that it takes a lot of startup capital to get things going, but if you started your business with only enough capital to get you through the first few months, you might find yourself in trouble.
Bootstrapping is always good, but even if you didn’t bootstrap your business in the beginning, you need some rainy-day money, and a lot of it—like enough to carry the business for at least a year.
The market is fickle; there may come a time when you have to use your own money to keep your business afloat for a while. It seems difficult to come up with that kind of money for a young business, but it just might be the difference between staying open and closing your doors for good.
Use the Growth S-curve as a guide.
As a smart business owner, you may have already heard of the famous “Growth S-Curve,” which is basically the ideal growth model that also demonstrates a need for innovation.
A plateau generally occurs not long after the initial launch of a new product or service, then a window of opportunity to innovate another product before customers are lost, and then another growth spurt occurs if you manage to hit another homerun.
No matter how successful a product or service is, if your business continues in the exact same way, the buzz will eventually wear off and people may begin to lose interest. People demand improvement and innovation, and if you don’t give it to them, you run the risk of losing customers.
There is no secret formula to ensure that your small business will not fail, but there are good formulas. Each business needs something different to survive, so having a good sense and understanding of your market is always key.
At the same time, if you can stash some money away for tough times, continually strive to reach new customers, and always be innovating, your business might be around for a long time.