3 Reasons My Business Didn’t Fail in Our First 3 Years
About 40% of businesses fail in the first three years (bls). Surge Business Law is now three years old and we haven’t failed! What did we do to make it this far?
First, let me celebrate! This is the three year anniversary of the firm! It’s been so much work and yet so rewarding! In that time, we’ve worked on over 1,100 legal projects helping many hundreds of small businesses launch, grow and succeed. My favorite days of the week are Mondays and Thursdays, because those are client meeting days. I love talking to you, my clients, and learning how I can help you. I’m so grateful to get to work with you.
Three tips that helped us thrive
Many of you know that I went to law school after a former business failed. I wanted to know why businesses fail and succeed. Since, I have become somewhat of an expert on it. This is what drives my passion to help other businesses.
I jokingly tell people, “I don’t want your business to struggle with the same old problems we’ve known about for years. I want your business to struggle on new, unknown problems!” So here are three common problems to avoid.
0. Cashflow, or running out of money
Nearly 90% of business failures come from “cashflow.” I interviewed distinguished professor Jim Stice who teaches accounting and business management. We talked about cashflow and I pointed out that it is simply a category of problems, and that there are other more specific problems that cause cashflow issues. This lead to some great discussions on why businesses run out of money.
Almost all business failures come from cashflow issues, but what causes cashflow issues? Here are my top three.
1. Overspending at the beginning
This is the easiest way to kill your business fast. I always advocate for starting as lean as possible. In what ways can you avoid spending money early on? Here’s what I did:
- Share an office
- Use inexpensive decor and equipment when possible (shabby chic)
- Take advantage of as much free marketing as I can
- Avoid subscriptions and contracts that lock me into a vendor
I’m fortunate that my number one tool is inside my head. Some businesses must have good equipment to get started. Can you rent? Yes, the cost per hour for a mini-excavator is higher for a rental, but you only pay for it when it’s making money!
2. Focus on a niche
You probably already know that I only do business law. I won’t help you split up with your spouse, but I will help you split up with your business partner! I won’t help you buy a house but I will help you with a warehouse!
At first I thought I was narrowly focused enough by only doing business law, but I have since narrowed it further. We now focus on businesses with under 50 employees. Also, we focus our efforts on businesses who need advice, rather than a quick fix. And, while we will help you with problems, we prefer to focus on prevention.
A terrible mistake is to try to serve everyone. McDonald’s knows their focus is on value-conscious eaters. Whole Foods knows to focus on people who want premium groceries.
By knowing our audience we can create products that meet their needs. We can use the right words and messages that resonate with the audience. It also allows us to stand out from our competitors when trying to reach our specific audience.
3. Perfect Pricing
Think of this as a verb—we should perfect our pricing, as in get better at it. I don’t think we can get the perfect price without some trial and error. By doing pricing experiments, we can get closer and closer to perfection.
The perfect price means we know what it costs to provide products and services to our customers. For example, if we’re selling a gadget, we need to know how much it costs to buy the gadget, how much to ship it, store it, and how much it will cost if there is a return. We also need to know our overhead, so how much is rent, labor, tax, and all of the little things needed to keep the business going.
It can be quite surprising to add up the costs! When I help people with a business plan, they’re usually shocked at how much they need to charge or sell in order to break even.
This is why I’m a huge advocate of creating a business plan and doing short experiments. A business plan helps you define your business goals and make financial projections. It’s well worth the effort.
Short experiments should get more attention. For example, I’ll run an ad for a few days to see how it works. Then I’ll tweak it to see if anything changes. We’ll also test different kinds of social media posts to see which ones connect with audience. And, most importantly, I track the results of what I do. That way I can tell what actually makes my business more successful.
We should always be doing experiments and trying new things. The business landscape is constantly changing and what worked before may not work today. This is particularly true with pricing. In 2024 we’ve seen terrible economic pressure, which I mentioned in my last blog newsletter.
Remember, Surge is not just a law firm. We help businesses with a variety of problems and our team of experts answer questions about whatever challenge you’re facing. If you have our Momentum Membership, you get unlimited email support from the team.
I look forward to serving you for another three years and beyond!
