“How’s business?” That’s a question I often ask small business owners, compelled by my love of talking shop to anyone. The answer is often shrouded in general optimism.
The answer should be, “Things are not going well.” You may have heard the statistic that “half of all businesses fail.” More precisely, Forbes says that 20% of businesses fail in the first year and 50% in the fifth year.
but why? Is maintaining a business really that difficult? Maybe it is. According to Forbes, half of all business failures are caused by a lack of demand for the product or service being offered. It may seem like a no-brainer to make sure people are offering products they really want, but reading the minds of consumers isn’t easy. None of us have the natural ability to know the thoughts of others. The only way to find out is to ask, and it’s impossible to ask everything.
After a lack of interest, Forbes found that more than a third of business failures are due to running out of capital. It is difficult to estimate costs in business, because there are always unexpected costs. Most of us can suffer from a lack of cash flow. Consider also the US Customer Satisfaction Index, an economic measure of the quality of goods and services experienced by consumers. On a scale of 0 to 100, the index did not crest 80, indicating much improvement in consumer satisfaction. Anyone who has worked in customer service knows how hard it is to please everyone.
This issue is important because the success of small businesses affects everyone. Our nation has more than 33 million small businesses, accounting for more than 99% of all businesses, according to the US Small Business Administration. Collectively, those businesses employ about half of all workers in the United States. In addition, 80% of small businesses consist of only one person. These figures show how close small businesses are to each of us. Chances are we are employed by one of these poor enterprises, or we care about someone who is. The good news is that we have the power to help these businesses.
Think about all the skills you need in life that you didn’t learn in school. Maintaining your credit score, changing a tire, and cooking are things many of us had to learn on our own. Running a business is often the same. Many small business owners work for themselves because there is an opportunity to use their unique skills. What restaurateurs, plumbers, and retail store owners rarely learn in their training is how to run a business. Driven by emotion, most people take a trial-by-fire approach in hopes of learning enough about business to survive. We as consumers need to understand these challenges based on our own experience in living our daily lives.
Management textbooks love to discuss the qualities managers should possess. In my opinion, the most important trait of a good manager is often overlooked: humility. Good business owners know they’re not perfect. They want to improve, and those who succeed are hungry for feedback. The problem is that the desire for continuous improvement is often one-sided. Consumers don’t normally comment on their experience, either good or bad. Maybe it’s time to change that practice.
I suggest that we work to engage as consumers and provide frequent feedback on our experiences. Leave a comment if you got great service or your product experience exceeded expectations. Knowing what’s done well helps businesses stay on track. If you notice ways your experience could be improved, share it. Sometimes businesses don’t realize that customers are dissatisfied until someone mentions them. Doing so ensures the possibility of correction and improvement. In both cases, our contribution as consumers can strengthen the local economy on which we depend.
The nature of business is imperfect. It might be good for all of us to embrace the idea that good business requires a little help.
Dr. Dave Hickman is Assistant Professor of Management at Columbia College’s Robert W. Plaster School of Business.