3 Reasons why Business Owners get stuck
3 Reasons why Business Owners get stuck in the trap of survival
Table of Content
1. Introduction
2. Business Model Gaps
3. Unclear systems.
4. Ineffective Teams.
5. Conclusion
Introduction
Every business is at different stages like
Struggling phase.
Stability Phase
Success phase
Scalable phase
The majority of businesses are finding difficulties in coming out from the Struggling and Survival phase.
There might be more than 3 reasons businesses get stuck in the trap of survival but we are discussing only the most common 3 reasons here.
3 Reasons why Business Owners get stuck in the trap of survival are as under.
Business Model Gaps
Let’s understand what does Business model means.
This means a profit-making strategy for any business. It includes how the money will come to the business.
What are the expected expenses?
What will be the approximate profits this strategy will earn?
The business model gap can be further classified into three factors which are as under.
a) Low Margins
b) Slow Payments
c) Inconsistent Sales.
Let's discuss these three factors to understand them in a better way.
a) Low Margins
If the margins in the business are very thin then this low margin will lead us to reduce or stop the investments in business expansion, creating a good team for better results in the future and to invest in better systems for the business.
You can’t solve your problem by increasing the price of the product.
Once you increase the price the order goes to the competitor.
There is no differentiation in the products.
We need to create some differentiating factors that are very difficult for our competitors to make in our niche marketplace.
b) Slow Payments
When the payments are slow then the cash flow problem will start.
Your business model is such that you can’t control the slow payments.
The problem of slow payment or late payment means we have 30 days or 60 days payment terms but still our Customer delays the payments for one or other reasons. This leads to poor cash flow.
Ex. We pay the light bill as well as mobile payments on time because we know that if delay these payments then we will face a problem of service problem as well as have to pay the late-fee charges.
c) Inconsistent Sales.
Because of the long sales cycle, customers take more time to decide.
There are businesses where 70 to 80% of revenue comes in one quarter and remaining three quarters we get 20 to 30% revenue. or the first 15 days of no sale and the last 15 days majority of the sale. Trends may be different from business to business.
But our aim should have a consistent sale.
Less the variation more predictable we will be.
Unclear systems.
Marketing, sales, and operations are the core systems of any business.
There are other systems also like supplier development, New product development, Customer complaint handling processes, etc.
These unclear systems can be divided into two factors.
a) Marketing, sales, and operations depend on owners’ efforts and intelligence.
b) No clear system to get predictable results.
a) Marketing, sales, and operations depend on owners’ efforts and intelligence.
The job of Marketing is to get leads.
The job of Sales is to convert leads to deals to create revenue.
The job of operations is to provide products or services to the Customer at the right time and the right quality.
b) No clear system to get predictable results.
Even though the Marketing, sales, and operations depend on owners’ efforts and intelligence there are no predictable results.
The owner is playing a trial-and-error game.
The owner is the system means no system and it’s a trap.
We do have different systems in place for our business.
Some systems will work and some will not work but we need to be in constant upgradation of our system for better results.
For that, we need a good amount of data to support our decisions.
Ineffective Teams.
10% of solo entrepreneurs do not have teams.
When the team is not capable owner has to do the the things on their own.
The teams can be further categorized into two parts as under.
a) Lack of skills to produce results.
b) Lack of commitment
a ) Lack of skills to produce results.
The team is not aligned with our company goals.
We do not have an effective training program as well as training needs identification in place to train them toward the company goal.
b) Lack of commitment
Even though you have the team you do not have the system.
Most companies focus on result parameters and track them to judge the performance of the team members.
More than 90% of companies are doing these practices.
What's wrong with this practice is that it ignores the individual performance. Every human has different capabilities we need to understand our team and its behavior patterns to get the best out of them is the role of the leader.
If we go with the process thinking approach and establish the linkage between input and output parameters then we can track the efforts of input variables which is easy to track.
This will improve the commitment.
There might be more than 3 reasons businesses get stuck in the trap of survival but we are discussing only the most common 3 reasons here.
Please let me know in the comments other reasons which you feel are not covered in this post.
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