Throughout my business career, I have found truth in the sayings,“You don’t know what you don’t know” and “What you don’t know can hurt you”. As I sit down with business owners to talk about their businesses and how to improve them, I find that they carry a great deal of frustration. They are frustrated, because they know that they need to do some things different to move their business forward, but they don’t know what to do and where to start.

The latest statistics from the Small Business Administration (SBA) now show that one third of the new employer establishments close within 2 years, and just over half of the businesses close within 4 years. That’s better that the old belief that 50% of the new businesses fail in the first year and 95% don’t make it to 5 years, but not much better. The question is, however, is it this frustration and uncertainty on the part of the business owner that actually causes them to throw in the towel?

Well, if you were to Google the phrase “Reasons why Businesses Fail”, you will get pages and pages of lists of reasons. These lists come from many and varied government agencies, research organizations, and business service organizations. As you go through the lists, the very first thing you recognize is that every list is different, both in number of reasons and the reasons, themselves. If you look further, you notice that the reasons are primarily “symptoms”.

Symptoms are listed; such as, lack of cash, poor location, poor sales, not competitive, bad employees, bad inventory, etc. Nowhere, on any list, do you see “They don’t know what to do next”. Why, because no business owner would ever admit that. So, they talk about the symptoms and not the real causes of their frustrations and, often, business failures. I believe that there are just three basic causes for small business failures. They are Lack of Skills, Lack of Business Experience, and Lack of Planning.

What do we mean by “Lack of Skills”? In most cases, businesses are started by someone who was previously someone else’s employee. They performed a particular function; such as a research scientist, an auto repairman, or an electrical contractor. For whatever reason, they chose to be “self employed”. At that point, they changed from a doer to a manager, from performing a function to managing a business, from being an employee to an employer. Where, however, did they pick up the skills necessary to handle people, to reach and satisfy customers, to deal with banks and investors, who are all necessary to run their business? The owners get concerned when they have all of this “business management” to learn and carry out, and then they can’t be in the lab or on the shop floor as much.

Next is the Lack of business Experience. Here, the owner may have experience in sales or research, but they don’t have any experience in running a business. They may know an industry, but not how and why it works a certain way. It is a far simpler environment to be protected from the outside business world as an employee, than to be thrust into the business world as a business owner. Experience is a great teacher. It teaches us what to expect in certain situations. It teaches us how a new product is accepted in the marketplace. It teaches us how to protect our business from running out of cash. It teaches us what customers need. Our experience gives us a necessary frame of reference to evaluate situations and react in the proper fashion. With a new business owner, their limited experience doesn’t protect from business surprises, sometimes big ugly ones. They just don’t see that change-up coming. Does that cause the business owner frustration? Can you say “Why didn’t I see that coming?”

As for Lack of Planning, there’s an old adage, “If you don’t know where you’re going, any road will take you there”. Without a plan, every decision is made in a vacuum. Without a plan, employees ask questions on what they should be doing and why. Without a plan, owners don’t know if they are moving the company in the right direction. That road ahead could lead to success or failure. How does that business owner know which it is? Without the necessary business skills and experience, a business owner can’t visualize where he wants to go. He/she can’t lift there noses from the grindstone to look ahead to the future. Without a final destination, a vision for the business, an owner can’t plot a course and communicate that course to his/her employees. You need a road map to follow. How many times have you heard an owner say that “they don’t feel that they’re making any progress”. That is certainly another cause for frustration.

So, what we actually see happening is that the Lack of Skills, Business Experience and Planning causes the business to suffer from lack of cash, low sales, bad inventory, etc. However, it is the uncertainty driven by these causes, not the symptoms, that really drives the owner’s frustrations, which, in turn, may cause the owner to give up on the business. So, how do you reduce the frustration? You remove the uncertainty. How do you remove the uncertainty? You clarify the picture. When you know you need a tool or part to fix or build something, you go out and get it. In this case, the business owner needs to get skills and experience that they don’t have. An owner shouldn’t be afraid to ask for help, because there is no way that they could have started out with all of the necessary knowledge and tools.

There are organizations and services available just for this purpose. Free support and advice can be obtained from local Chambers of Commerce and their Small Business Development Centers, county or city Departments of Economic Development, state Department of Business Assistance, local chapter of SCORE, etc. For more intimate, one-on-one advice, owners can take on services of senior business advisors that act as confident, mentor, planner and an extra hand to get things done. Finally, for major project assistance, owners can look to consultants for their particular program.

So, new owners of small businesses can greatly improve their chances for success, and reduce their frustration. First they need to swallow their pride and quiet their ego. Next, with an open mind, they need to get the knowledge, skills and advice they need. This should be every new business owner’s first order of business. ©2007 Change Up Management, Inc.