Small businesses traditionally have a very high failure rate. In fact, 80 percent of small businesses fail in the first five years. But the problem isn’t the business idea; the problem is that the company neglects to follow a few basic principles, which can result in lost revenue.
Here are the 3 biggest mistakes most business owners make.
Mistake #1: Neglecting to collect customer data.
Rarely do I walk into a brick and mortar store, buy something, and have the shop owner or employee ask me for my email address and phone number. This is a huge mistake for a couple of reasons.
First, it costs a lot more to produce a new customer than it does to get an existing customer back in the store. In any form of advertising, we’re often paying for eyeballs that will never buy or who are not interested in our product.
The nature of advertising is to get a message into the marketplace and hope that it hits enough relevant people so we can get a positive return on our investment.
The most targeted traffic is the people who have already voted with their wallets that our business is something they are interested in. If you do not capture the data, you’re missing out on the cheapest, most efficient ad dollars that yields the highest ROI of any other method.
Now take that customer data and load it into Facebook and Google to create a “lookalike audience” who behave exactly like your customer. This feature in advertising has revolutionized what’s possible.
Instead of guessing who the potential customers are, these companies will use an incredible amount of information to match the characteristics of your clients to find similar people. For example, the Facebook app embedded on our mobile devices tracks everything we do, and everywhere we go . . . and it finds other people that follow the same pattern of behavior.
If this scares you, maybe it should. But what’s even scarier is not leveraging this new era of customer acquisition in your business. It can be a game changer for you.
Mistake #2: Forgetting to follow the data and testing what works.
In any business, the process of getting someone to give you money is not a single “yes,” but a multitude of them. First, if you have a physical location, they have to see your sign or see you on a mobile device map and decide. Yes, I want to stop in there.Next, they’re greeted, (or not), and they make another decision. Yes, I like this person, they left me with a good first impression. The next “yes” can be a multitude of things, but one of the deadly mistakes that businesses make is not breaking down the “yes points” to test and optimize different approaches.
For example, the way you greet someone that walks through your front door is one of the most critical aspects of creating a great first impression that leads to the customer feeling that they like and trust you. Have you tested different ways of welcoming people and measured which is the most effective? You should test at least ten to twenty different ways of greeting people as they enter your establishment.
Once you have your winner, it becomes the new non-negotiable system that everyone must follow. This is just one example of many different things you must do to increase valuable foot traffic and conversion rates.
Mistake #3: Not creating a solid plan and strategy.
There’s an excellent reason why McDonald’s sells more hamburgers than anyone else in the world . . . and I hate to be the bearer of bad news, but it’s NOT because they taste good. The reason McDonald’s has sold so many hamburgers over the years and currently has 375,000 people making them on a daily basis is the incredible system that keeps the McDonald’s machine running.
A system dependent business has value, can be sold and can create a tremendous lifestyle for the owner of that business.
A people dependent business is a job. Sometimes, it’s a job that doesn’t pay very much, has a lot of risk and sometimes a bunch of ungrateful people that claim to be working but need to be babysitted.
Do you have clear descriptions (Position Contracts) and Standard Operating Procedures of how each job gets done as well as KPIs (Key Performance Indicators) that hold each person accountable for the results they create in their position? If not, you don’t have a solid business plan.
The process of creating systems and processes takes time and is somewhat tedious. But the payoff is a business you can sell for a lot of money or a business that allows you the freedom to relax on the beach in the Cayman’s whenever you want. Sounds good, right?
If you are interested in learning about the ins and outs of business, we have strategic advisors available to help you evaluate where the gaps are and help guide you toward your path of business success.