The prospect of starting a small business may strike people as exciting, intimidating, or both. This is for good reason; the appeal of being your own boss and launching a lucrative business is tempered by the high failure rate of small businesses. A quick internet search reveals no shortage of studies providing causes and statistics regarding small business failure rates. While the exact rate of each study varies by industry and timeframe, most studies indicate that roughly half of small businesses remain in operation within a few years of opening.
This reality invites the question of what makes the survivors successful? I recently had the opportunity to speak with a few small business owners, each of which owns a retail storefront. The purpose of my inquiry was simply to learn a bit about the challenges of being a small business owner, and even more so, to learn what has contributed to their survival and success.
All three businesses started small, slow and deliberate, and did not go into debt to launch their business. Often small retail operations with comparatively little overhead can avoid business loans with proper planning. Each business owner interviewed began with his own money, and in one case, also the money of two partners. Launching with savings as opposed to financing carries the benefits of a heightened personal commitment, as well as the absence of the burden of third party debt. Business loans or some manner of external funding are often unavoidable in other businesses with higher overhead and fixed costs, but retail can offer more flexibility in this area, depending on the scale of the launch.
Commitment to customer service was emphasized by each business. The age of internet retailing and large discount box stores makes it imperative for smaller businesses to offer value through other means, as they generally cannot compete on price and selection. This is where the human element becomes critical. A personal selling effort and cultivated relationships with return customers, if managed properly, are able to win out over the appeal of larger retail options. Some people are willing to pay a higher price for a more personalized buying experience.
Each of the three businesses has remained viable by serving a market demand that was either growing or previously under-served. Two market opportunities were dictated primarily by geography. The Music Shoppe opened in a suburb on the west side of Cincinnati that is roughly 20 miles outside of the city. Since the store’s opening, this suburb has grown significantly, and the Music Shoppe has grown along with the population and economy. The Music Shoppe secured dealer status for large music brands such as Guild, Taylor and Martin guitars, and thus serves as the nearest dealer for such brands for the west side of Cincinnati as well as southeastern Indiana.
Of the four elements discussed common to these three successful small businesses, all seem intuitive from an outside perspective. However, small business start-ups have a high failure rate, and even these seemingly obvious attributes escape some small business owners, who ultimately close their doors as a result. These four elements, debt management, customer service, business differentiation and proper market opportunities, are by no means a comprehensive list of the requirements for business success. The formula for business success contains many more variables than those covered in this article. However, the consistency throughout the three cited examples of debt management, customer service, business differentiation and proper market opportunities, underscores their importance as contributors to business success.