Why Do Businesses Fail?

cash-flowRunning a business is no easy feat. It takes a great amount of time, money, and dedication to maintain a successful business. Unfortunately, most people do not have what it takes to make it work long-term. According to the Bureau of Labor Statistics, approximately 20 percent of small businesses fail within their first year, 50 percent fail by their fifth year, and a whopping 70 percent fail by their tenth year. While it is not possible to prevent all circumstances that could result in the closing of your business, you can lower your risk of business failure. Here’s a look at why some businesses fail and how you can avoid having to close your doors permanently.

Inadequate Exchange of Money for Value

With more than 32.5 million businesses in the U.S., it is not enough to simply purchase inventory and slap an open sign on the door. You need to provide your customers with real value in exchange for their hard-earned cash. There are several reasons why adding value makes a difference in your success. First, businesses that over-deliver are more likely to create ‘buzz.’ This means your customers will spread the word about your business and will be more likely to choose you over your competitors. Providing value to consumers will also help you create a positive brand image and reputation over time.

Poor Leadership

Businesses in all industries require exceptional leadership skills. Without a strong leader to guide your small business, your vision may be lost and with it your ability to successfully run the organization. If you do not possess the necessary leadership skills to run your business, hire someone who does. An exceptional leader will make smart management decisions, properly supervise staff, enhance productivity, and approach new opportunities with creativity and a clear head.

Lack of Research in the Current Market

Where many businesses fail is in the research stage prior to implementing their business venture. When you fail to investigate the market before investing money, you risk losing your investment and much more. In today’s fast-moving society, many markets are overserved and there is minimal room for new organizations to step in. If you are insistent about joining an already saturated market, be prepared to bring something new to the table.

Failure to Effectively Communicate with Customers

Communicating with your customers is more important than you think. It is important to understand what your target audience is looking for in a product or service, and how they plan to get it. When you fail to open a dialogue with your customer base, you are missing out on important information that could help your business gain a competitive edge. In addition to maintaining open communication with your customers in real life, you also want to stay connected online through social media and other web sources.

The Bottom Line

Although the failure rate of new businesses is fairly high, this doesn’t mean you can’t run a successful business. When you understand why businesses fail you can take the necessary precautions to prevent failure and guide your business in the right direction.

Thank you to Dream Builders for supporting our blog.

Taxes and Business

Small business owners experience their fair share of challenges. However, taxes top the list as one of the most hated business activities. While tax season can result in confusion, uncertainty, and even irritation for many business owners, there are ways to make the process go more smoothly. Start by sitting down with your accountant or financial advisor and look over the numbers. You should be well-informed of where you stand before you file your taxes to minimize errors and reduce your risk of an audit. There are also other practices that small business owners should follow when filing their tax returns.

Check and Double Check All Income

One of the biggest mistakes a small business owner can make is to fail to report all of their income to the IRS. It is important to remember that the IRS will receive a copy of any 1099-MISC forms that you receive. They will then use these documents to match the income that you have reported. If the two numbers do not match up, you could face penalties for under-reporting. Even if you do not receive a 1099-MISC from a client, you will still need to report that income.

Pick an Accounting Basis Wisely

Small business owners have two main options when it comes to preparing tax returns: cash or accrual. With the cash basis, all income is recognized as it is collected and all expenses are recognized when they are paid. With the accrual basis, all income is recognized as it is earned and all expenses are recognized as they are incurred. While both options have their own set of benefits and downsides, most lenders prefer to see accrual basis financial statements.

Keep Personal and Business Expenses Separate

Taxes can be a nightmare when you combine your personal and business expenses. Not only can combining these expenses be highly time-consuming come tax season, but having blended money allows the IRS to start looking at your personal accounts. Always set up a separate bank account for your business and keep personal money in a personal account.

Correctly Classify Your Business

If you do not classify your business correctly, you could wind up paying more taxes than you actually owe. There are several main classifications for small businesses, including sole proprietor, single member LLC, limited liability company, limited liability partnership, S corporation, and C corporation. Do your research to determine under which of these your business falls and file your taxes accordingly.

Choose an Advantageous Depreciation Method

Small businesses are able to take advantage of a variety of deductions, including the common depreciation deduction. However, first you will need to choose which depreciation method to use. If this will be your first year in business, the IRS permits a deduction of up to $100,000 on most equipment and furniture. However, a business that does not make a profit cannot deduct this first-year depreciation deduction. If you are in the very early stages of business, a slower depreciation may be a better option.

Paying Taxes as a Small Business

Filing business taxes differs significantly from filing a personal tax return. Be sure to work alongside an experienced accountant or financial adviser when completing your business taxes to ensure that they are done properly.

Thank you to Orlando Towing & Recovery for supporting our blog.

Understanding the Different Types of Market Structures

competitionIn every economy, there are different types of market structures. Systems exist depending on the industry and the companies operating within that industry, just like how Fredericksburg Pressure Washing defines competition in pressure washing industry within its locality. It is very important for business owners to understand the type of market they operating in, as this helps them to better themselves in terms of dealing with competition.

Here are the four common types of markets.

Perfect Competition Market

In a market structure characterized as perfect competition, there are a large number of buyers and sellers. All the sellers in that market are small sellers in competition with each other. There are no significant or bigger sellers that influence the market. This means all the businesses in such a market are all price takers, but none really defines the prices.  In a perfect competition market, there are a couple of assumptions we make. First, we assume that all products are homogeneous and completely identical. There are no barriers of entry to market in that there is a free entry and exit from the market. There is no concept of consumer preference.

Monopolistic Market

A monopolistic market is a more realistic situation. In this type of market, there is still a large number of buyers as well as sellers, but all of them do not sell homogeneous products. The products are all but same or related but all sellers sell slightly differentiated products. Consumers have the preference of choosing one product over the other. The sellers also have the option of charging a marginally higher price since they enjoy some form of market power.

Oligopoly Market

In an oligopoly market, there are only very few firms in the market.  In most cases, 3-5 dominant firms are considered as the norm in defining this type of market. In this type of market, the firms compete with each other or collaborate to offer products and services to customers. The use their market influence to set the prices and make as much profits as they want. In this case, consumers become price takers. In this type of market, there are different barriers to entry. If a firm succeeds to enter this market, they are faced with a lot a lot of challenges trying to establish themselves.

Monopolistic Market

A monopoly market refers to a market structure in which a single firm have control of the whole market. In this market scenario, a monopoly firm has the highest level of market power and consumers do not have any alternative. As a result being in monopoly, a company normally reduces output and increases prices so as to earn more profits. A company in monopoly maximizes profits and sets its sets its price. There are very high barriers to entry as well as exit. There is only one firm that dominates the market. This means there is only one firm that dominates the market. Monopolies are normally not desirable because they are characterized by low outputs and higher prices as compared to competitive markets.

 

Tips to Expanding Your Business

BusinessGrowth and expansion are key goals of every business person. However, expanding any business doesn’t come cheap. Scaling a business requires considerable efforts. It means working on your sales and marketing to expand these two to the limits. It means understanding taxes and all compliances. To scale your business to greater heights, you must get several components right, including hiring the right team. If you are struggling in your business and you are looking for ways to scale your business, there are sure ways to go about it.

 

Acquire new products and services

This is a strategy that sounds relatively easy, but implementing is not all rosy. First, you need to figure out what products and services your customers are interested in before you can acquire them. Figuring out what your customers want may not come cheap, as you might be required to conduct market surveys to ascertain what is good for them. Ask your current customers what they think about a certain product, and how willing they would be to acquire those products. Your market research needs to focus on the demand for new products or services in the market.

 

Sell more products to existing customers

A flip side of the first strategy is to sell more products and services to existing customers. It means penetrating deeper to the current customer base. Start by carrying out a segmentation analysis of the market, to identify which customer segments are more likely to buy your products, should you decide to level up. You can do an analysis that divides your customers into different segments based on the specific criteria you choose. Analyze any potential profitability that comes from the products or services you want to sell them.

 

Expand to new territories

Business expansionThe idea of this strategy is to sell your products or services to new markets, new customers. These customers can be in different segments as well as locations. If your business deals with retail, expanding to new territories means opening new locations at different geographic regions across the country. Such type of expansion will require a significant investment in terms of time and money. When thinking of expanding to new territories, think about how your presence will be felt in that new location and make yourself recognized by upping your marketing.

 

Target new customer markets

Most businesses place a target on their sales and marketing efforts to specific customers based on demographics such as gender, location, age among others. However, there might be other customer markets that are viable for your services and products. You need to reach the right target customers using the right medium. You need to ramp up your advertising and marketing to these customers so that they can see other benefits associated with your products.

 

Acquire another business

Another important aspect of expansion requires acquiring another business that might be labeled a competitor or a promising one. Acquisition and merger play a key role in doubling the size of business overnight, expanding your sales and revenue. However, due diligence is required to achieve a successful merger and acquisition. Focus on the financial state and potential of the company you want to acquire.

Why Businesses Need to Collect and Use Customer Data

DATAData has become an important part for any business today. As businesses continue to collect data, they must be able to contextualize it and make new insights from it. The internet of things and artificial intelligence are two important issues for any company to capture and analyze data, and use it for better business decision making. Companies leverage the use of data, from customer behavior to predictive analytics. Companies capture data in many ways. Companies capture and process customer data on metrics such as demographics, behavioral data among others.

There are many reasons why a business may decide to capture customer data, top of the reasons including;

 

Improving customer experience.

For many companies, customer data to offer a better way to understand and meet customer demands. When you analyze customer behavior be it reviews and feedback, it can come at greater importance in helping provide better goods or services that fit the current marketplace. Companies use consumer data to improve customer experiences and also make better individual decisions. Another important aspect of collecting data is to use it to improve website functionality.

 

Refining marketing strategy

Data can help companies get a better understanding of how consumers are engaging and responding to your marketing campaigns. This can also help them adjust accordingly. Just like other aspects of consumer data analysis, marketing can be very important in creating a personalized experience. Leading companies make use of customer data to map users’ journey and personalize it. Segmenting data allow companies to effectively market to the right people.

 

Turning data into cash flow

cash-flowCompanies that make use of data stand a better chance to profit. Data brokers have today risen, as they buy and sell information on customers. When advertisers have ready information, they stand to immensely benefit, as the demand for data is ever increasing. The more data business have, the more they can use it and turn it into cash flow. Data brokers are now selling immerse levels of data and generate lots of money.

 

Using data to secure data

To secure the most sensitive data a company has, it needs data too. An example is how banking institutions make use of voice recognition data to authorize user access to financial services and thus protect any fraudulent attempts that may come along the way. Data capture and analytics technologies continue to be more sophisticated and companies are now finding the new and more effective way to collect and contextualize data.

 

 

Digital Marketing Tactics for Small Businesses

Digital MarketingDigital marketing tactics form an integral part of the success of any business. Any business that aims to achieve exceptional growth in their marketing efforts must introduce digital marketing. Online marketing, also known as digital marketing has a different number of components that cover every aspect of promoting your business online to create and deliver sales. There are different components of digital marketing that can combine to create a great sales and revenue outcome for any business. If you want to get it right online, here are marketing tactics you should apply.

 

Content Strategy

If you want to attract people to your website, you must start by creating quality content. A valuable content includes everything that causes engagement to be it blog articles, amazing infographics, and awesome videos. There are a lot of free WordPress templates that can be used to get you started. Quality content will help you in increasing your social media engagement. A well-crafted content can help you rank better and higher on search engine result pages as Google loves fresh, relevant and high-quality content.

 

Organic SEO

Some businesses still think SEO is costly, but this is not the case. SEO can be expensive when it comes to paid search, but you must understand that there are so many cost-free steps that one can do to rank faster. To get started in SEO, you don’t have to be a technical person whatsoever. First, you need to assess the state of your site. When doing fresh content, ensure that you do all the necessary metadata, descriptions, headings among others. Ensure that you long for long tail keywords as these will be important for you to rank.

 

Social Media

Social mediaAny business looking forward to increasing their brand visibility must employ the use of social media. Social media creates a great way to interact with your customers. When choosing which social media sites to operate, make a wise choice. Take advantage of free analytics to track metrics. Identify who are the key influencers in the industry and engage with them. When you have to post content to these social media sites, ensure that you use scheduling tools such as Hootsuite.

 

Mobile Marketing

Mobile marketing is very important for your digital marketing efforts. The goal of mobile marketing is to provide users with the best possible experience when they are browsing on various sites. To achieve the best mobile marketing for your customers, you need to ensure that your website looks good and that it can be viewed across different browsers. If you are using WordPress, you can achieve mobile friendliness for a site with the use of a responsive theme. Understand all the vital differences between a mobile-friendly website and a native app.

Once you have a substantial number of customer and fans interested in your products or business, one important thing you must not forget is to use email marketing. Email marketing is very important when it comes to building a list of customers and prospective ones, as you will be marketing your products and services directly to these people.

 

Why Your Business Needs Digital Marketing Strategy

Digital MarketingWhere do you start when you want to develop a digital marketing strategy for your business? Many businesses know vital digital and mobile channels they need, but yet struggle to acquire and retain customers. A digital marketing strategy can help you plan on how to grow and engage with your audience effectively. It has to understand that marketing and advertising have come a long way. There was a time television, newspapers, radio, and magazines were the main sources of advertising. Today, everyone is going digital. Without digital channels of communication, your marketing efforts are poised to suffer.

Here are important reasons you need to have a digital marketing strategy for your business.

 

Strategy Gives You Direction and Goals

Building a digital marketing strategy can help you learn; by getting to know what to do, plan; by building a plan of actions, follow the plan and grow your business.  It is an important strategy that will give you direction on your goals. Companies that do not have a clearly defined strategy are poised to suffer because they will not know essential elements needed in their business. Without specific goals, it becomes hard to know exactly what you will be required to do online.

 

Consumers are going digital

60 percent of today’s consumers agree that they cannot live without their smartphones. That means consumers are now looking for any source that provides digital content for their consumption. This means that a clear digital strategy can be very important in helping you shape up your business. If your brand is not digital, you will lose potential customers.

 

Tracking and Monitoring

With a digital marketing strategy, you can monitor and track your performance. With all the running campaigns, you will need to keep track of all the digital marketing metrics. These metrics can help you get an accurate measure of ROI as well as defining the areas of improvement for your business in the future. With the use of analytics tools, marketers can check and manage how audiences reach their campaigns.

Brand Management

With a digital marketing strategy, your brand becomes more interactive. Certain digital marketing campaigns such as social media marketing, text messaging, blogging, and email marketing among others, can help give customers are a more personalized experience. Using short online videos, a business can grab the attention of their audiences. Content such as infographics, images, short videos among others can help audiences be informed, engaged and all this is great for brand management.

 

Increased Reach

Digital strategy can be very important in helping you with reach as well as increased visibility for your brand. Traditional marketing can be an effective tool to reach your target, but if you are looking to go beyond and reach a massive audience, you need to go digital. Digital marketing can be very important in helping you find new ways to target your audience and great exposure for effective brand recognition. Planning an effective digital marketing strategy doesn’t need to be a complicated process. You only need to define your goals, KPIs, tactics, and document all of them for action.