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Starting your own business is a shot in the dark. It will push you out of your comfort zone, and challenge you in ways you never thought were possible. But despite the hardships that come with creating your own business, a lot of Filipinos are still doing it.
In 2020, the Department of Trade and Industries tallied a staggering 839,444 business registrations between January and early November. This signals a 32% jump from 20191.
What’s more surprising is that according to the Philippine Statistics Authority, a whopping 99.51% of the 957, 620 business enterprises in the country are MSMEs.2
Unfortunately, all these businesses don’t see the end of the tunnel. Over 70% of businesses in the country closed due to the pandemic, and this number is not unique to the Philippines.3
In the US, 20% of small businesses fail within their first year. The number climbs to 50% in the fifth year, and after a decade, only a third of these businesses remain operating.4
Considering these numbers, the inherent risks that come with starting your own business are truly not for the faint of heart. To help protect your interest, you must know the most common culprits that cause businesses to fail. This way, you can expect and prevent the obstacles that may come in the future. This article will help you increase your chance of achieving entrepreneurial success.
Common Reasons Why Businesses Fail in the Philippines
A lot of entrepreneurs get uncomfortable when they are forced to talk or learn about failure. However, ignoring the most pressing reasons why businesses fail will only get you in trouble.
Considering the alarming rate of businesses closing in their first decade, you need to study this section well.
Problems with cash flow
Without cash, it would be impossible for your business to run. All establishments need cash flow so they can float through various sales cycles – high or low.
An empty bank account is one of the major reasons why a lot of great businesses fail because the sad reality is, cash is truly king in the world of business, and not everyone can turn to lenders when cash is strapped.
No market fit or insufficient demand
You can’t possibly create a business without being sure that there is a demand for your product or service. Before launching, make sure you have concrete data on your customer profile and existing competition.
More than that, you also need to have your Unique Selling Proposition or USP. All these are invaluable to help you make better decisions that translate into sales.
If your business is riding on a trend, always be ready to adapt when the trend naturally fizzles out.
Run out of capital or funds
This is by far one of the major reasons why a lot of businesses that show potential close in their first few years.
A lot of entrepreneurs underestimate how expensive it is to run a business, especially since you want to meet all internal and external expenses such as rent, staff salary, equipment, and raw materials.
Did not have the right team or employees
You’ll be surprised at how the right people can help your business thrive. When you don’t prioritize your recruitment process, you will end up hiring unreliable staff that will simply drag your business down.
Keep in mind that all entrepreneurs should be good leaders. They must foster a healthy, happy, and loyal team that is motivated to push the company forward.
Edged out by the competition
If there is already too much competition in your industry, and you’re late to the game, it’s like putting your one foot in the grave.
Starting your business and cementing your brand reputation is hard enough, but if you have to fight an uphill battle due to intense market saturation, you’ll end up draining your resources.
9 Steps for Building a Successful Business in the Philippines
Starting your business venture and seeing it grow is one of the most rewarding things in the world. While the process may seem hard and intimidating, it can be boiled down to 9 simple steps.
1. Define exactly what you want to achieve
When it comes to starting your business venture, you first need to ask yourself what your goals are. Make sure that you are setting SMART goals from the beginning. SMART means:
It is important to ask yourself three vital questions when setting up your goals. What does your business idea look like in the next 5 years?
What can you do now to test your long-term goals? And lastly, what is the major and enduring purpose of your business?
So instead of writing you want to have a successful business in a few years as a goal, specify it to “earn Php100,000 per month in two years.”
Related: How to Improve your Business
2. Develop an entrepreneur’s mindset
There is no doubt that being an entrepreneur is one of the most exciting things you can be. But how do entrepreneurs think and behave?
First, they spend time with successful people. If you want to be the best, you need to surround yourself with the best. Become part of a group where you can learn and share ideas. These people should also support you and motivate you to make the best entrepreneurial decisions.
More than that, you also need to practice your ability to make quick decisions and stay focused even when everything around you is not working well.
3. Identify your Product Market Fit (PMF): Address a real market need
Product Market Fit is a scenario where your target customers are purchasing, using, and telling their peers about your products in numbers that are enough to sustain your profitability.
When you skip this process, you’ll miss out on a great product that can satisfy the market.
Before developing any product, make sure you have the feasibility study to back up that enough people are willing to pay for it.
Also Read: How to Validate your Business Idea
4. Create a business plan that outlines everything from launch to operation
Your business plan will serve as the steering wheel of your business venture from the day you launch it, to the day it grows. A great business plan will guide you on what you need to do in every stage of your business.
Thankfully, making a business plan for the next 5 years is not as hard as you think. Instead of treating it as a one-time document, picture it as an ongoing project that is made up of mini-plans that cover sales, marketing, operations, pricing, and other aspects of your business.
5. Prepare everything you’ll need to launch your business
Before launching your business idea, you need to do your assignment. This involves researching your industry, finding out about your competition, and mapping out your financial plan.
This sounds like a lot of work but if you forgo this duty, you’ll end up being unprepared to take on the market. When you feel like you need to do a thousand things at once, do not hesitate to outsource.
If you can’t afford to hire help, delay your launch until you have settled everything. Here’s a checklist of what you should know before launching your business venture:
- Vision and mission
- Financial plan
- Tax obligations
- Business plan
- Business processes
6. Set up strong systems & workflows
Can you imagine how long it would take for a fast-food chain to serve your burger if they did not have a clear business process and workflow?
Setting up these things will enable you to communicate better with your employees, and get things done more effectively. This leads to better customer satisfaction.
7. Build a great team
Great businesses have high-performing teams that can communicate well with each other. As an entrepreneur, your goal should be to cultivate a strong team and encourage employees to work with each other towards the same goal.
A great team is goal-oriented, committed to their roles, has diverse experiences, and is open to learning. When teams have these qualities, as well as a shared set of goals and values, they can help the business grow.
To ensure that your team works together seamlessly and performs to the best of their abilities, you need to demonstrate great leadership skills.
8. Keep detailed records
Without keeping a detailed record of your transactions, you will be running your business venture through guesswork.
It is recommended to follow this step so you know exactly where your business stands, as well as the challenges you will be facing. This way, you can create the right business strategies to overcome certain challenges.
9. Provide excellent customer service
It takes more than an awesome business idea and capital to ensure business success. You also need to ace your customer service.
A study by NewVoiceMedia revealed that 51% of customers will not do business again with a company after a bad service experience.1
Considering this, meeting your customer’s satisfaction is mandatory if you want to enjoy more sales opportunities in the future.
8 Tips for Achieving Success in Any Business
There is no clear recipe for success, especially in business. Before you bring your business idea to life, you need to be armed with tips that will increase your chances of being successful.
1. Have a clear vision of what you’re trying to achieve
When it comes to running a business, you need to have two clear visions: short-term and long-term. Your short-term vision will help you get through day to day operations.
On the other hand, your long-term vision will be the driving force that will help you navigate the long and arduous journey of running your business.
2. Find out what makes your product, service, or brand unique
No matter what industry you belong to, you are probably dealing with intense competition. Your USP will help set you apart from other businesses that offer the same products and services as you.
If you don’t figure out what your USP is, you’ll simply blend into the background.
Your USP can be many things. It can solve a problem, take away your customer’s pain point, or satisfy a need. For instance, there are many shampoo products customers can choose from today.
If you want to be unique, you can sell shampoo bars made from wholesome ingredients to limit plastic waste.
3. Learn how to market effectively
When starting a business, you can’t expect to have thousands of customers by simply telling your relatives and friends that you launched a product.
You need to dive deep and develop effective marketing strategies to get the word out about your business.
With marketing, you will reach and connect with your target customers, and set the pace for how your business will run.
Failing to understand the importance of traditional and digital marketing means you will lose out to your competition, and miss out on targeting opportunities.
4. Know your competition
You may think there’s no need to learn about your competition because you’re not a competitive person, but finding out who your competition is, what they are offering, and how much their services are will help you make your brand stand out more.
When you know your competition, you can price your products competitively, respond to marketing campaigns with your unique initiatives, and have the upper hand when it comes to bringing relevant information to your customers.
5. Find Opportunities
Once you launch your business, you may think there is no need for you to study the market anymore. However, examining the current market condition will help you find more opportunities for sales.
Finding opportunities involves working on an existing concept and improving it.
For instance, if you noticed that most of your customers are using mobile, you can leverage the power of mobile-optimized websites to get you more leads and conversions.
6. Stay focused on your goals
Staying focused is one of the most valuable qualities of any business owner. However, how can you maintain your focus if you have to worry about your marketing, sales, expenses, and managing your staff all at once?
Writing your goal always helps. Make sure to keep your goal list visible so you will always be reminded of the reason why you are working.
Aside from that, set milestones. It can be extremely frustrating to not see results when you are only focusing on your long-term goal. By ticking off small tasks, you will stay more motivated.
7. Have a plan for growth
In the previous section, we tackled the importance of a business plan not only for your day-to-day operation but also for your growth.
Your business growth plan outlines your strategy. This can be something as simple as phrases and bullet points, or an in-depth document. After executing your plans, track your progress, and adapt based on your findings.
Growth is vital for the long-term sustainability of your business. It does not only help you get new sales, but also acquire new assets, attract better talent, and offer more useful products.
8. Build relationships with customers & other businesses
Forging relationships is mandatory for business owners, especially with your customers. Your target marketing will be more comfortable with your brand if they feel valued.
Keep in mind that repeat customers are more profitable than new ones, so take time to nurture them by asking them for feedback, showing genuine interest in their experiences, and encouraging them to converse with you.
Your customers are not the only ones you should build relationships with.
What Successful Businesses have in Common
It can be demotivating to think that the odds of your business lasting for more than a decade are slim based on evidence. To help you get a better picture of what you should work on, we’ve rounded up the characteristics successful businesses have in common.
1. A Strong USP
Competition is tough – that may not come as a surprise to you. But if you don’t find a way to ace your competition and stand out, your customers won’t patronize your products. Therefore, business success would be out of the picture.
Whether it’s hiring the best staff, offering great customer service, selling the lowest-priced items, or finding unique raw materials, there are countless wants to make your business shine from your competition.
2. Efficient Businesses & Operational Processes
When you don’t prioritize streamlining your business and operational processes, you will simply be wasting effort, time, and money.
So how can you develop your business and operational processes?
First, examine your current processes. If your teams are wasting their time and resources on things that do not matter in the long run, chances are, it needs a drastic improvement. Do not be afraid to ask your team managers and employees for suggestions.
Additionally, automate as many tasks as you can. This way, you can decrease the risk for error, and finish tasks at a faster rate.
Related: Best AI Tools for Business
3. Well-maintained Accounting
Improving accounting & bookkeeping processes in your business will not only lead to better efficiency but also loss prevention and higher revenue.
Whether you run a small business or a huge corporation, you should streamline accounting processes, but how exactly can you do this?
First, automate repetitive tasks. Technology is your friend, and all departments of your business can benefit from it, even accounting.
If you don’t have time to do accounting yourself, or cannot afford to hire a full-time accountant, you can outsource this service. Having a reliable accountant on your team will help you gain valuable insight into your growth.
4. Excellent Marketing Tactics
If you look at all successful entrepreneurs in different industries, you will notice that they have a heavy focus on marketing.
Marketing goes beyond spending thousands of pesos on Facebook and Instagram ads. It also involves planning how you can make a connection with your target customers.
Even if you don’t have a huge budget for marketing, that is not an excuse to skip it. Instead, it’s a reason to work harder to create more valuable content for your customers.
5. A Well-Built & Effective Team
Just because you posted a vacant position on a local job board does not mean the best talent will immediately knock on your door.
As observed in the top businesses in the country, they value their employees by giving them competitive salaries and benefits.
When the team is well compensated and experiences the benefits of work-life balance, employees will work better towards achieving their goals.
6. Focuses on the Customer
If you don’t want to be another faceless brand, you need to be fully committed to making your customers happy.
The most profitable business is not afraid to do the leg work in keeping in touch with their customers. Their target market is always at the center of all their initiatives and development processes.
7. Gets helpful insight from advisors and mentors
Even if you have decades of experience in running a profitable business, you still need the help of trusted advisors and mentors to help you make more informed decisions.
When you have a successful entrepreneur on your side, someone can challenge your vision. They are also the best ones to ask if you are at a crossroads on how to run your business.
8. Resilient & Adaptable
The pandemic has taught millions of Filipinos that adapting to unexpected situations is integral for survival. For instance, many restaurants now offer al fresco dining and delivery options to increase orders.
If you want to become a successful entrepreneur, you need to be prepared to pivot from your current strategy and try new things. This can include launching a new product, changing your raw materials, or expanding your list of offers.