How The Strong (Businesses) Survive

How The Strong (Businesses) Survive

Have you ever wondered why some businesses prosper and others fail? Have you ever tried to answer the question: What does the successful business person know that the unsuccessful business person doesn't? I guess you could write a book about it, couldn't you? And many books have been written on this very topic.

But before I give you my answer to this question, "Why do some businesses succeed and others don't?", let me first rephrase the question so that it more accurately describes exactly what we're talking about here: Why do most businesses fail and only a few survive?

Have you ever considered the statistics on business start-ups compared to business failures? Well here are the numbers, and they are nothing short of astounding: Every year, approximately 1 million new businesses are started. By the end of the first year, at least 40 percent of them will be closed. And within five years, more than 80 percent will be gone!

Think about that for a minute. If you've started a business within the past year, there's only a 60% chance that you're gonna make it through the first 12 months. And there's only a 20% chance that you're gonna still be around at the end of five years.

But there's more. Of the businesses that manage to stay alive for five years, more than 80% of those businesses will fail in the second five years. Hmmm. Run the numbers on that, will ya?

So, for every 100 businesses started this year, only 60 will last one year. And only 20 will last five years. And only 4 will make it 10 years. That's right, only a measly 4% will last for 10 years!

Now let's get right to the point -- that means that every Small Business Owner or Self-Employed Person reading this newsletter only has a 4% chance of making it for 10 years. That's not a very comforting thought, now is it? It's down right depressing, don't you think?

But it's not my intention to depress you. My goal here is to motivate you, to inspire you, to help you to start thinking, "Hey, what do I have to do to make sure I'm one of the few who make it?" If you're already forming an answer to that question in your mind, you are way ahead of the pack. Most will simply accept the fact that their business is doomed to failure, sooner or later. Most (let's call them The Mediocre Majority) will not spend any time at all planning to succeed.

I work with many Small Business Owners and Self-Employed People. They are my favorite type of client. Oh, sure, I have plenty of clients who only come to me once a year for help with their personal income tax returns. And those folks are great people, too.

But my "first love" are my Small Business clients. These folks are certainly a Breed Apart. It takes a special person to "go it alone", to say to himself and the world, "I can successfully offer a product or service to the marketplace."

And I'm here to tell you that I've had several Small Business clients who have been hit hard by the recent economic slowdown. I see their numbers every month, every quarter, and they haven't been that great lately. Some are really struggling. Some are close to calling it quits. It doesn't matter what kind of business or what segment of the economy we're talking about. Yep, things are tough right now for the American Small Business Owner.

But enough doom and gloom. Hey, I'm here to inspire you, right? OK, then how about this scenario: Same economy, same town. Yep, we're still talking about Small Business Owners right here in Northeast Indiana, but I can tell you there are plenty of businesses that are booming in the midst of this "so-called" recession.

That's right, I also have business clients who experienced their best year ever in 2001, and it looks like 2002 will be even better! I have clients who have not been touched at all by the economic slowdown. Just the opposite, in fact.

How can this be? I'll tell ya exactly how this can be, with one incredibly amazing but authentically "true" example -- a "real life" story of two Small Business Owners who I have personally encountered and have come to know quite well.

Two years ago, two identical Small Businesses came to me for help. Both businesses had been formed in late 1999, and by early 2000 both realized the need for professional accounting and tax assistance. Both businesses were the exact same type of business, providing the identical service to the Fort Wayne area. Both businesses were exactly the same size and were even located in the same office park. You could walk from "Business A" to "Business B" in less than 5 minutes -- they were literally right across the street from one another. I mean, you couldn't have asked for a better "case study", but again, I assure you, I am not making this up.

Anyway, you have probably already figured out what happened to these two businesses, haven't you? Yep, Business A didn't even make it to the end of Year 2000. Business A was out of business within a year and never made a dime. The owner ended up with a load of debt and went back to working for someone else.

Business B, on the other hand, experienced tremendous growth in 2000 and even greater growth in 2001. And the owner of Business B is now making a very comfortable living from the profits of his business and his business will continue to grow in 2002.

Let's cut right to the chase, shall we? Why did Business A fail and Business B succeed? Here's why:

Business B implemented a Marketing System to accomplish his Marketing Plan. A Marketing System that consistently, predictably, and profitably acquired new customers who were eager to purchase what the business had to sell. Business A did not.

That's it. That's the major difference between these two businesses. That's the main reason that Business B succeeded and Business A failed.

And I am suggesting to you right now, that the existence of a Marketing System is the single most important factor in determining the success or failure of any business, including yours.

Please don't misunderstand me. There are plenty of other factors that contribute to a business' success or failure. A viable product. Reliable service. Capable management. Quality personnel. Positive cash flow. Equipment and materials. Sufficient operating capital. On and on the list goes -- think of all the things that have contributed to your success (or lack thereof) over the years.

But if you had to prioritize those factors, if you had to pick one factor as most important, one part of your business that was so critical that it towered above all others in significance, what would it be?

If your answer to that is anything other than Marketing, I truly believe you need to take a closer look at yourself, your business, and what makes your business successful. Why am I being so adamant about the importance of Marketing? "He's an accountant, for goodness sake! He's a numbers guy! Why is Wayne up on this 'marketing soapbox'?"

The reason is because I had to learn this lesson about Marketing the hard way. And I am determined to share my experience with anyone who will listen.

Like you, I'm a Small Business Owner too. And for several years I always thought that a good accountant didn't need to advertise. I mean, isn't accounting and tax preparation a "recession-proof" business? People always need an accountant. It's unlikely that the government will ever make radical changes to our tax system -- don't I have a bunch of "captive clients" who have to come back to me year after year. As long as I provide "good service", I'm set for life, right?

No, not even a tax business can rely merely on "good service." Why is that? Because tax clients, like any other type of business customer, can be fickle. Since you own a small business, you know what I'm talking about, right? Make no mistake about it, "customer loyalty" is an illusion. And I learned very quickly that I should not expect customers to stick with me forever.

Surveys tell us that about 25% of tax clients love their accountant, 25% hate their accountant, and the other 50% really don't care one way or the other.

So like any business, mine is a business with customer turnover. People move out of town. People die. People decide they no longer need professional tax assistance because they want to save some money and do their own return this year. Or they only came to me in the first place because my fees were lower then their previous accountant (you know, a "price shopper"), so they will stay with me only until they find someone who will undercut my fees.

Earlier this year I had a client who terminated our relationship even though I had saved him over $12,000 over the past 4 years. The reason? His business is struggling to survive and he said he just couldn't afford to pay me any more, so he joined a bartering club which included an accountant with whom he could trade services. It really didn't matter what type of service I provided him, he was gone.

So you see, the tax business is no different that any other business. Acquiring new customers is my Number One challenge, too.

Until about 3 years ago, I really struggled with this "marketing thing." I didn't have a Marketing System and came to realize that I needed one, fast! My business was doing "OK", but I had reached a plateau (ever been there?). It seemed like I was working harder and harder each year, but not seeing any growth. I wanted to take my business "to the next level", but didn't know how to get there.

My problem was this -- I really didn't have a marketing system at all. I was like the proverbial chicken with his head cut off, running here and there, doing a little bit of this and a little bit of that. You know, run an newspaper ad and see what happens. Then do nothing for awhile. Then realize I'm supposed to be doing something to get new clients, so I better get out there and "network", so I attend the local Chamber of Commerce meeting and expect people to become clients just because I eat lunch with them and exchange small talk!

Then I realized, like Business B, that I needed a Marketing System. A system that could predictably and efficiently attract new clients. So I spent many hours researching the materials of various "marketing gurus", and finally decided to implement a system of direct response advertising that targeted new Small Business Owners and Self-Employed People via direct mail.

And it worked! Having a marketing system really worked. I mean, it was nothing fancy, but I began to implement a simple direct mail program to my target market and my business suddenly took
off!

As Year 2002 starts to wind down, I challenge you to ask yourself, "What is my Marketing System?" Do you even have one?

There are plenty of low-cost marketing strategies available to the Small Business Owner / Self-Employed Person. And it's not my purpose here to debate the pros and cons of the many marketing methods out there.

My point here is this: You can't expect your business to grow if you don't sit down and put together a Marketing System. No more "hit and miss" advertising. No more thinking that if I just "build it (a website, that is), they will come!" No more thinking that if I just run a few ads here and put up a billboard there, that business will pick up.

To grow a business, you need more than that. You need a Marketing Plan. You need a Marketing System.