A recent Forbes article got me thinking about why so many small businesses fail. It’s an unfortunate fact that we all seem to accept, but it really doesn’t make much sense. An employee at a larger business is incentivized by managerial bonuses, while small businesses are run by owners who can achieve entrepreneurial returns – wouldn’t you think that the small business owner’s incentives are more powerful? Furthermore, small businesses have a much closer relationship to their customers, and this in conjunction with lack of layers of overhead and embedded management should mean they are more nimble in the market.
Yet, many fail. The article from Forbes pointed out that having a single business owner can actually thwart a small business’ growth – they are too wed to their core ideology and inflexible, unwilling to adapt until the business completely fails. They also tend to reject innovations, trying to conserve cash and constantly seeking more proof that investments will pay off.
There are two things that all entrepreneurs should think about to avoid the fate that belies so many (too many!) small business owners:
- Invest in digital marketing: Everyone knows that digital is the one growing ad market, while print is fast dying. Yet AdWeek reported that only 3% of small business ad dollars are in digital! Small business owners continue to put most of their marketing money in local newspapers and direct mailings, which are the least targeted and least read advertising out there. Companies like Google and Yahoo make digital advertising cheap and easy – as little as $100 for a campaign!
Chart from Business Insider, 3/19/2013
- It’s all about apps: As the number of mobile users has grown, we have seen a distinct preference for apps over mobile sites. Most small business owners try to add mobile capability to their already existing website. But customers still seem to be going for apps over these mobile sites.
Chart from Business Insider, 3/19/2013
All of this being said, PCV works with entrepreneurs every day and we realize that the life of a small business owner doesn’t necessarily lend itself to putting big bucks into technology initiatives and scoping out the marketplace during downtime. There is no downtime! While larger companies have Boards and researchers and budgets for innovation, small businesses are more averse to risk because they have to be. That is where PCV advisors step in. Our network of advisors have years of experience in all sorts of fields, and they are always eager to roll up their sleeves and help out someone who is a bit newer to the game. Let PCV Advisors be your backup and sign up for advising today:http://www.pacificcommunityventures.org/index.php/advising/.