Few people are as passionate about small business success as Melinda Emerson, aka SmallBizLady.
Melinda is the founder of The Quintessence Group and consults with Fortune 500 companies and small businesses on social media strategy and content development. She authored the book “Become your Own Boss in 12 Months” and writes for the New York Times You’re the Boss blog.
“I have my dream job. I wake up without an alarm clock because I wake up with a purpose – to end small business failure,” says Melinda. “Like so many small business owners, I figured out my calling and I’m good at it. The challenges of being your own boss are great but the rewards are, too.”
On the occasion of the 15th anniversary of her business, I chatted with Melinda to get her insights into what small businesses can do to thrive. She shared five main reasons why small businesses fail, along with tips for avoiding these common pitfalls:
1. Give up delusions of grandeur
“A lot of people don’t think about all that’s involved in being their own boss,” says Melinda.
While the rewards can be tremendous, she sees people who are under the illusion that they’ll have fewer problems and more time, when the opposite is quite often the reality.
Be prepared to work hard, troubleshoot lots of problems, and learn the art perseverance.
2. Nurture your network
Many people simply don’t have a network to sell to when they start out and that can be hard.
“When people start a business, they need to network,” she says.
According to Melinda, that means returning every phone call, tapping into your network of friends and family, attending industry events, and getting involved in your community.
“Your network is your net worth,” says Melinda.
3. Keep in touch with your customers
“I know plenty of businesses that will let people walk into their shop or restaurant, spend $50 or so dollars, and leave. They don’t make the effort to keep in touch with their customers!”
Melinda advises asking your customers for their contact information so you can send them a thank you note, keep in touch through newsletters, and keep them posted on any special events or offers you have coming up.
“Small businesses owners always ask about how to get new customers but I always ask them, ‘what are you doing with your existing customers?’ Nurture your existing customer base — it’s cheaper to keep a customer than it is to gain a new one.”
4. Pick a niche
Melinda stresses the importance of putting a stake in the ground and finding your area of specialization.
“The recession killed generalists,” says Melinda. “People are seeking someone who specializes in solving their particular problem every day.”
It’s also important to specialize because, as a small business owner, you have limited time and resources so you need to pick a target you can hit.
“You need a niche to get rich. To put it in basic terms, who makes more money, the heart surgeon or the general practitioner?”
5. Know your numbers
People let their fear of math prevent them from knowing what’s going on in the business but fiscal discipline is paramount to success, says Melinda.
“If you don’t manage your household with a budget you won’t manage your business with one. You need to know how much profit is in every sale and how much budget you have to operate your business.”
Keeping your records up-to-date is important because by the 15th of the month you need to know how your business did last month and adjust accordingly. Melinda also points out that marketing is the lifeblood of a business so it’s important to have a monthly marketing budget.
“Don’t just market with what’s left at the end of the month.”
Lastly, she says by knowing your financials you’ll know if you should outsource marketing activities or keep them in-house.
“If your time is worth $200 per hour, you shouldn’t spend it doing $20 per hour work, you should focus on generating more clients that will pay you $200 an hour. Outsource the things that you are not good at or are not a good use of your time,” says Melinda.
We’d love to hear from you: What one lesson did you learn when starting your business that you can share with other small business owners?