Do Not Let the Startup Honeymoon End: Understand Why Small Businesses Fail

Are you reaching the end of the honeymoon phase of your spa or massage studio? It is a critical time for small business owners because here is where the real work begins. During the honeymoon period, you are excited at the prospects, you see your vision starting to come together and the first clients are coming through the door with the prospect of more on the way.

But now you are experiencing speed bumps on your way to lasting success. You may start to have negative thoughts, stress levels rise, and you feel motivation slipping. Many small businesses do not make it past the first year with owners losing enthusiasm as challenges mount and/or they are unprepared to tackle the inevitable obstacles that get in the way of keeping the business going.

The Commerce Institute reports that the small business failure rate is 20.4 percent during year one. By year five, 49.4 percent of small businesses fail.[1]

To keep going through the first year of challenges and setbacks requires resiliency. It also requires understanding what the causes of small business failures are, especially in the startup phase, and being prepared to meet them head on.

Behind small business failure

Among the chief causes of small business failures are:

·         Financial challenges

·         Lack of business plan

·         Employee management challenges

·         Inadequate or insufficient marketing

·         Failure to adapt to marketplace changes

Financial challenges

Financial challenges are not unique to small businesses but they are one of the chief causes of small business failure. There are a host of critical financial challenges that can affect the viability and ultimate survival of a small business starting with limited access to capital and cash flow management. Access to capital for purchasing inventory and equipment, hiring employees and marketing is crucial yet you may face challenges in obtaining loans or credit due to limited financial history or lack of collateral.

 

Cash flow can seriously impact growth since as a spa or massage studio you may have high rent and other operating costs and you also lack purchasing power to negotiate the most favorable terms with a supplier unlike a larger company. Also, until your calendar starts filling up with appointments, you may have gaps in revenue, which can lead to cash-flow issues that affect day-to-day operations.

 

Changes in the marketplace also affect your financial stability. As a small business, you are particularly vulnerable to competition and fluctuations in the economy.

 

Lack of business plan

Intuition sometimes can be invaluable in decision making but it takes more than a good gut feeling to keep your business going long term. Among the chief causes of small business failure is lack of a business plan to get your spa or massage studio off the ground, which you then revisit yearly to make sure you are on track, that the conditions that existed when you launched have not changed or if they have how you need to respond to them, if your goals still hold and what are the tactical everyday programs and activities that will enable you to meet your objectives.

 

The National Federation of Independent Businesses (NFIB) asserts companies with a business plan have the best chance of success. This is particularly true if they identify their potential markets, define their ideal customer, and analyze their competition.[2]

 

Realistic objectives should guide your business planning. Setting unrealistic goals, whether about revenue, new client acquisition, or additional services you want to offer can lead to activities that increase your expenses, which impact cash flow. Businesses that have tried to expand too slowly or without careful planning run the risk of losing money and in the worst case, close their doors.

Employee management challenges

Trying to do everything yourself? Among the challenges that affect the high small business failure rate, not letting go is neither helpful nor sustainable for the long term viability of your spa or massage studio. Not only will you have time constraints to do it all, but you may also not have the proper skillset. If your budget does not enable you to hire all the team members necessary to manage accounting, marketing, full-time estheticians or massage therapists to meet a range of client needs and preferences, consider part time or freelance employees. You can control your budget during high demand times and bring on exceptional talent to fill unique needs.

 

Also, regarding employees, management may not be your strong suit regardless. Having a strong second in command who has good managerial skills to oversee your team is invaluable.

Inadequate or insufficient marketing

Without the proper marketing, prospects do not know who you are, what you offer, where to find you and even if they find you, how your business compares to the competition. Marketing can have both on and offline components, but the essential piece is your website which lists your services, provides information on your background, and highlights retail offerings and any specials or discounts. Your website can include the ability to book appointments and even offer chat to answer questions. Marketing can include social media, blogs, email marketing, and text messaging as well as direct marketing and ads in local papers. You do not have to do it all but whatever you choose, be thorough.

 

Failure to adapt to marketplace changes

Things change and that includes your marketplace. You may cater to a certain type of clientele but the market changes and prospective new clients are looking for different treatments or their needs for massage therapy change from relaxation to therapeutic and preventative care. Also, one size does not fit all so that offering personalized services is no longer an option.

The entrance of larger established players into your market, such as franchise operations, can impact your bottom line because they carry an established brand reputation and provide tools that can help fast track growth. Responding to new competition changing industry trends, and client preferences requires being nimble and adaptable.

Avoid small business failure

Here are steps to take to avoid small business failure:

·         Develop strong leadership skills, which includes assigning responsibilities to others, encouraging your team to communicate and creating a culture that encourages productivity and independent thinking.

·         Engage regularly with clients to find out what they need, their satisfaction with your service offering and their overall experience – whether positive or lacking in some way – in your spa or massage studio.

·         Stay on top of marketing by continuously leveraging digital channels and assessing the effectiveness of campaigns.

·         Adhere to your plan for growth, including managing resources including financial, investing in your teams through training to enhance your service offering, and updating your operations with the latest equipment and technology as needed

Take the necessary steps to avoid the most common reasons for small business failure and keep the honeymoon phase with your spa or massage studio going for a long time.