Everyone who starts their own business wants it to be successful.
However, most of the startup businesses fail after just a few years, especially for those working in construction… Why is that?
A chart from Small Business Trends plotted the data gathered from the Census Bureau’s Business Dynamics Statistics. According to the chart, Mining has a 51.3% survival rate
which ranks it as the highest, whilst construction has 36.4% survival rate over 5 years, ranking it the lowest.
This is a cause for worry for the business owners in the construction industry. Here are the top 3 causes of failure in this business:
When you begin a business, make sure that you have enough money to make it run for at least six months or so, to allow time for the business to start making money on its own.
You also need to know what you’re doing… And I don’t just mean your trade or profession.
As a business owner, it’s important you know how to ‘run the ship.’ Meaning everything from managing your finances, pricing your services, understanding cash gap, organising advertising, converting enquiries into sales, training, hiring and leading a team, and everything in between.
Unfortunately, many businesses go into business because they are sick of working for someone else, or believe they will get to take more time off and make more money by doing it themselves.
While this is true, these rewards only come after you’ve built the solid foundations of your business, grown it to a sustainable point, and leveraged yourself through a team.
2. Lack of Managerial Experience
Leading a team requires putting yourself in a ‘managerial’ position. Where you need to assure tasks are being completed, budgets are being met, the whole ‘kit and caboodle’.
You need to create, explain and enforce processes and systems to ensure things are done right the first time. Otherwise you’ll end up blowing out budgets by time over runs and wasted materials, and you may very well have to go back and do the job yourself… Which doesn’t help anyone!
Managerial experience really does take time, and you won’t ever have a business without a few mistakes. However, without working on improving how well you can manage your team and your business, you will end up in the same predicament as the businesses Small Business Trends tracked over the years.
3. Lack of Knowledge About Marketing
So you don’t know anything about promoting your product or how to “position” it to your market, but you have to sell your service to get work in… Good luck!
It’s quite common for many businesses to know absolutely nothing about marketing (hence why there are so many marketing companies that can help you with this.)
Many businesses even see advertising and marketing as an expense rather than an investment, simply due to this fact.
The trick is to get a return on investment (ROI) on your advertising and marketing, so if you put $1 in, you get at least $1 back.
To get an ROI on your marketing and advertising, you need to know a few things first. These are things like; what you’re actually selling, the pros and cons of your product and service, who you’re selling to (if you don’t know this, you could waste a lot of money putting your marketing in front of people who don’t need or want what you’re offering.) Is there a specific time of year that’s better or worse for your sales (so you can judge when you may need to ‘ramp up’ the marketing budget), how do you want people to contact you? Where do the people you want to reach spend their time? (Online, driving, show homes, etc.)
After this you can decide if you will do your marketing yourself, or pay an outsider or an agency to do it for you. If you outsource it to a professional remember, you need to get tracked results of you spend, so you can see what’s happening with the money you’re spending, and if you’re getting a return on your investment.
Nobody said being a businessman was easy. It takes dedication, knowledge, perseverance and responsibility to build a business that lasts throughout the years, and it’s okay to make mistakes, as long as you learn from them.
Continuous learning is what will outshine all of these downfalls that cost so many business over the years. If you don’t keep learning and developing your skills, you will become nothing more than another statistic plotted on a chart. So don’t let that happen.