The Main Reasons Businesses Fail

The Small Business Administration reports that 75% of new businesses fail in the first 5 years. The main reasons for failure include lack of a business plan, bad management decisions, poor customer service, lack of a marketing plan and inadequate financing. I will address all of these issues in future articles, but today I want to focus on the last two; lack of a marketing plan and inadequate financing. The reasons I want to look at these two are that I believe they are one in the same. Robert Kiyosaki, author of Rich Dad, Poor Dad, states, “A lack of funds is a lack of creativity. A good idea will always attract money and other resources.” The secret to finding customers is to develop a USP, a Unique Sell Point. A USP answers the fundamental questions that any potential customer has; (1) How is your product or service going to make my life or business better, easier, more fun, make me money or save me money. (2) Why should I buy this product or service from you as opposed to any of your competitors? The importance of a USP cannot be understated. A well developed USP becomes the foundation for all your marketing. If done correctly, a power USP allows you to charge more for your product than your competitors, removing you from the lowest price wins game. I am sure you are wondering, how do I develop a great USP? One of the best ways is to take a hard look at what I call the universal fears and frustrations of doing business with your industry. For example, fairly or not, home repair contractors have the reputation for taking longer than promised to complete a renovation job. A contractor could create a powerful USP by saying “We guarantee to complete the job within 5 days of our original promise date or we will cut our price by 25%.” They would then need to build the company’s infrastructure to meet that promise. The contractor would make sure that his estimating was systemized and accurate, his workmen were reliable, he wouldn’t take on too many jobs at once and stretch his team too thin and spell out how inclement weather and change orders from the client would result in increases in the days allowed to finish the project. But with proper planning and structure, a contractor could offer this type of guarantee to create his USP. Two examples of large companies that created powerful USP’s are Domino’s Pizza – 30 minutes or less – and FedEx – guaranteed overnight delivery. They are both interesting stories. When FedEx originally thought of offering overnight delivery, they didn’t know if it could be done and if so how much it would cost. After doing the research it was determined it could be done but the cost would be much higher than their competitors. They decided customers would value the service of guaranteed overnight delivery, so they launched the idea. The rest is history, as they say, and FedEx is now synonymous with overnight delivery. For Domino’s they publicly offered something that many of their competitors could do, make and deliver a pizza in less than 30 minutes. The trick was, Dominos was the first to say it. This can be true in your case as well. If you are the first plumber to offer call backs within 30 minutes guaranteed, even if there are 20 others who do the same, you win the USP. So what are the fears and frustrations of doing business with your industry? If you were to ask your customers, what would they say? In fact, if you aren’t sure what they are, ask your customers. Then build your USP around these fears and how you promise to overcome them for your customers. If you can do that on a consistent basis, then you will never have to worry about running out of money. The company, who takes away the fear of buying, wins every time. Your company can then price your service at a premium because by taking away my fear, I am willing to pay more. The contractor, who promises to do my renovation and hit the time frame promised, will win my business any day over the cheapest.