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Opinion: How to beat small-business failure rates

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It’s often been said that the majority of new businesses fail in the first five years. The numbers from the U.S. Bureau of Labor Statistics actually provide a bit more hope, stating that about 50% survive at least five years and 30% survive past a decade. Still, these statistics can make it a bit daunting to start a business.

What is it that causes so many failures? There are countless articles that will give you five to 50 reasons for the low success rates, but the vast majority of them boil down to one root problem: people.

People problems
Megan Macedo, a business consultant from Scotland who helps business owners find and utilize their stories, has a great phrase that I’ve shamelessly stolen: “Businesses don’t have people problems; people with businesses have problems.”

All companies employ people intending to provide goods or services to other people. A relationship in business is only different from other relationships in that it involves exchanging money for a mutually agreed upon product or outcome. 

In my experience helping solve people problems in rapidly growing businesses, I find the issues affecting startups are still there in million- and billion-dollar companies. A leader with unresolved heart or mindset issues will find themselves subconsciously creating fires to put out. This rings true as a solopreneur but becomes exponentially painful as your company grows in employee count. The CEO of a company with thousands of employees will see a host of problems that trickle down through every level of the company.

Know yourself
In a lot of ways, starting a business is like becoming a parent. You have your first child, and it’s a wonderful mixture of stress and joy, uncertainty and learning. As your child grows, you start to gain confidence in your ability to hold it together. Then you have another kid. You now have multiple tiny humans depending on you for everything, and every imperfection in your character is laid bare as month after month of sleepless nights and chaotic days bury you in stress and cortisol.

Discovering that people will consistently pay you for something is a similarly exciting journey. Growing your customer base and your team is exhilarating, but growth is when the proverbial fan gets hit. You now have people depending on you, both employees and customers, to do things you may never have done before. You have to think differently, solve new problems and react to unique conflicts. The actions you take have different consequences now that you have an audience of impressionable people who trust you to lead and provide for them.

One of the best ways of preparing for leadership and growth is to better know yourself. Take some behavioral assessments. Learn how you communicate and how others perceive you. Identify your strengths and weaknesses. Take inventory of unaddressed fears and insecurities that may affect how you respond when things take an unexpected turn. The better you can understand how and why you behave as you do, the better you can monitor and shift your behavior when needed. Leaders who understand themselves are authentic and inspirational, as their direction and communication comes from a place of humility and empathy.

Seek to understand
Knowing yourself is the first step to knowing others. The more you understand how your mind works, the more you’ll see patterns of behavior in others. If you recognize and own your strengths and weaknesses, you will be in a better position to help those who need your strengths and to ask for help from those who are strong in ways you are not. This is essential for effective leadership. As you build a team around you, hiring for complementary strengths will allow you to fully trust those you hire and to focus on your own strengths. 

Beyond building an effective team, seeking to understand others will allow you to better solve the problems of your target market. It will allow you to achieve resonance with your marketing message as you speak to the heart and mind of your ideal customer. 

There is so much more benefit to understanding people than I can share in this article. Suffice to say, remember that a business is just a bunch of people giving other people something they want. If you understand people, including yourself, and give them what they want, your startup is much more likely to beat the odds and thrive.

Ryan Baker is the founder of growth strategy firm Kingly Consulting LLC, and he’s a certified customer experience professional through the Customer Experience Professionals Association. He can be reached at ryan@kinglyconsulting.com.

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