Our 3 Guiding Principles to Creating Local Businesses that Actually Succeed
Updated: Sep 26, 2019
What are the reasons small businesses go out of business so often? Aside from unpredictable 'life changes' such as health/family issues, and being under capitalized (which is a whole other topic), there are in-fact patterns to why some small businesses thrive and others fail. Each one of these principles can be dissected much further -- but in this blog post, we're sharing the overarching themes as some 'food for thought'.
1. You can't be everything to everyone.
If someone asks "who are your customers?" and your answer is "well... everyone!" you're making a common mistake that most entrepreneurs tend towards. You'll never be successful trying to please everyone, it's just not possible. Carving out your niche, defining exactly who your best customers will be, and creating a strong brand identity that proudly identifies your company's personality and values will not only help attract the right customers (and employees), but also makes operational decisions easy. If you're confused about who you are (i.e. Burger King trying to do breakfast, or Dunkin Donuts trying to sell pizza) -- your customers will be confused too.
Being generic can only work if there's zero competition. If you're the only ice cream shop in town, then you can simply be known by locals as "that ice cream place". But when there's competition, or the chance for new competition to arrive (which is almost always!) businesses should be thoughtful about deciding what they want to be known for, and then leaning in on those areas. When you know who you are -- your customers will too.
2. Experiences are 'king'.
You've probably heard that 'retail is dying', however that's not true. What's really dying are bland stores who don't differentiate themselves, including big-box chains who haven't been future-thinking enough to adapt to what today's consumers value. The days of generic brands with no personality are winding down -- today's economy is experience-driven, and consumers are always looking for places, products, and activities that offer unique -- and will happily spend their hard-earned money for the enjoyment of those experiences. Did you know, a study by Harris Group found that 72 percent of millennials would rather open their wallets based on experiences rather than on material items.
This is where small, local businesses have the biggest advantage. Corporate chains that grow in popularity over the years ultimately struggle to adapt when consumer interests change. But small businesses can be agile and creative... swooping into a competitive market, even locating themselves right nearby a similar established business, and can easily win business if they can deliver experiences to their customers that they can't get elsewhere.
3. 'Good' isn't good enough.
50% of small businesses fail within five years. The most common reason cited is "no market need". Many more fail because they don't give consumers a compelling reason to choose their company over another similar business. They're simply one of many options. Getting people to try you out for the first time is incredibly hard, but the one thing you can more easily control is your customer's experience once you get them in your doors. Will they have just discovered their new favorite spot? Or will they have a decent experience, but then forget you exist? How often have you tried out a new place, had a 'good' experience, but never returned? The food was fine... the service was fine... it's difficult to pin-point exactly what's missing, but your gut reaction is just "meh".
We know, it's heartbreaking for a business owner to think of their business as "meh" and that's where many small business owners struggle to get out of their own way. With an uphill battle against a mediocre customer experience and a downward cycle of paid marketing and bad Groupon deals that don't translate to meaningful business growth, these business are unlikely to succeed. The most successful businesses are hyper-focused on details and putting themselves in their customers' shoes -- and are relentless about getting customer feedback and making continuous improvements. It's entirely possible to become the business where people leave grinning, and can't wait to return to... it just takes a healthy dose of humbleness to realize that your customers will tell you what's working and what's not, and a bit of perfectionism to keep standards high and not slip on the details.