A company has to grow in order to be successful. But growth is change, and change is never easy. Growth is an intensive process; a discipline focused around improvements. A business that grows can improve its processes, people, and products. To build a business requires different things at different times. It is an evolution that most companies can never experience.

Why do small businesses fail to grow?

One of the main reasons a business fails to grow is the lack of capital. If you don’t have sufficient capital to invest, your company will either fail to grow or grow at a snail’s pace. Of course, there are other reasons, such as bad management, bad business model, poor marketing, and many more.

What happens when a business doesn’t grow?

Some say, “a business that isn’t growing is a dying business.” Sadly, that is true. Most of the time, businesses that fail to grow bleed from multiple wounds.  If your business stopped growing, your business might have changed, your customers might have different needs, or the market place might have changed. Let me explain.

Why would a business stop to grow?

You might have changed your product without consulting your customers. You assumed that your customer would want the new product. When you brought the new product to the market, you realized that people don’t want it. Ouch. This happens often. Businesses create what they think will sell, not what customers want to buy.

It is also possible that you haven’t changed your product, and people don’t want to buy it anymore. The product might be outdated or out of style. The bottom line is that the market has no demand for what you are selling.

Sometimes businesses can’t grow because of macroeconomic factors. The country might be going through a recession, and your business could suffer.

Why would a business never grow?

There is a huge difference between a business that stopped growing and a business that never took off. If a business never grew, it is possible that it never sold anything the market wanted to buy. Businesses that succeed realize this early and change. They work with their customers and develop products that sell. Unfortunately, most businesses that fail to grow never understand why people didn’t want to by what they had to sell.

You want your business to grow, right?

There are many reasons why small businesses stay small. Perhaps the owners do not know how to expand. Maybe there is too much competition in the area. Or, the market is saturated.

Did the business owner fail to do the research ahead of time? Often the problem is less clear than that.

Most businesses can fit into one of the following four categories:

  • Level 1 – At this level, there is a single point of failure, the business founder. A tiny business, usually without any employees, it doesn’t make enough profit to be a sustainable business. Most companies start like this. A business that will succeed in the long-term should strive to move forward from this stage quickly. Most companies fail at level 1.
  • Level 2 – The business makes enough profit to be reinvested into the business or paid to the owner. At this stage, there is usually enough revenue to hire the first few employees. Most companies that survive, but stay small are operating at level 2. There is nothing wrong with level 2. You can be happy owning a level 1 or a level 2 small business. It takes an entirely different way of thinking to reach level 3.
  • Level 3 – The business owner managed to scale the business. A business can only get to this point if the business owner is willing and able to delegate. Most companies never reach this point. Scaling requires systems. Most entrepreneurs are focused on putting out fires instead of creating systems. Without systems, scaling is impossible. Scaling requires a different way of thinking. This is very difficult for many entrepreneurs. Systems make the business founder(s) redundant.
  • Level 4 – Large businesses with revenues over $100 million. At level 4, the entire company is built on systems from sales to accounting to customer service. At this level, everyone is reasonably easily replaceable. The business is a machine. Instead of being dependent on a hero figure like the entrepreneur, the system is the hero.

Major reasons why businesses stay small:

Running out of money.

Most businesses are at risk of running out of money. When the cash runs out, the company fails. It’s that simple. Many entrepreneurs start a business with no money or insufficient funds. You might ask yourself: What happens when a business runs out of money?

What do you do when a business runs out of money?

If your business runs out of money, you have a few options:

  • Reduce or cut expenses – If you pay rent, negotiate with your landlord. It is possible but unlikely that you can stop paying rent until your business starts making money. As another option, you can try to move your business to a less expensive location or a free location.
  • Negotiate with vendors – Try to negotiate better terms. See if you can delay payment for a while.
  • Find alternative vendors – You might be able to negotiate more favorable terms with another vendor.
  • Cut staff – This is hard to do, especially if you have great employees. Unfortunately, you might have to let some people go to get through these tough times.

Why can a profitable business run out of cash?

You might have business income, but fail to run a profitable business. Just because your business is making money, it doesn’t mean that everything is fine. Any business can run out of cash by growing too fast or wasting money on unnecessary expenses.

Unable to focus on what matters

Every business has limited resources. To succeed, companies must prioritize their focus. This is important because each business has limited resources: capital, time, human resources. So it is critical that the team behind the business focuses on activities that drive success. These activities can be different at various stages in the life of the company.

Failing to look the part

Many small businesses operate behind poorly designed logos, DIY websites, and inactive social media accounts. If you want prospective clients to take you seriously, you have to look the part.

If you want to grow your business, you have to create the image of a larger business.

Executing an ineffective marketing strategy

Most businesses need an effective marketing strategy to grow. If you want a successful business, you have to develop a marketing strategy. Understand your customer, and find the best ways to reach them.

Here are some of the most effective marketing strategies to grow your business:

  • Social Media Marketing – SMM is not only effective for B2C businesses, but there are also effective social media marketing tactics for every business.
  • SEO – If you have any online competition, you need to optimize your website for the search engines.
  • Content Marketing – Content marketing is an important part of search engine optimization, email marketing, and social media marketing.
  • PPC Advertising – If you want to stay competitive online, paying for traffic might be unavoidable.
  • Email Marketing – It is easier to grow a business with a growing email subscriber list.

Inability to grow sales

If your business has competitors, you can only grow if you have a solid sales strategy. Your business can only grow if you can take customers from the competition.  A strong sales team can make a big difference in the bottom line.

How do you increase sales?

  • Sell more to your existing customers.
  • Sell the same service or products to more customers.
  • Create new products or services.
  • Develop partnerships with non-competing businesses.
  • Create a referral program.

You are not putting yourself out there.

Trying to be modest is an admirable quality, but you have to push it a little in business. If you downplay your business, others will too. You need to be singing the praises of what you do to anyone and everyone. Getting people talking is how to encourage word-of-mouth sales. Chat with people you meet everywhere. And don’t forget social media. You can instantly connect with potential clients/customers in a major way.

Not knowing where you want to go.

You need to have a bigger picture of your business. Don’t just focus on the day to day running of your business. Where do you see your business in the future? Do you want to branch into other areas of service or products? You need to visualize what you want. And, here’s the biggie…write it down. Make your plan as clear as day. Create the steps you are going to take to get there. If you don’t have a vision, how are you ever going to change what you are doing? If you don’t have steps to take, you will be floundering around in the dark. So, take a few days to brainstorm where you are going and how you’re going to get there.

Wasting time on trivial tasks

Now that you know where you’re headed, think about your day to day priorities. Many tasks get flung in your direction as a business owner. The easy thing is to spend a lot of time being busy with tasks. But busy does not mean productive. It is crucial not to waste your time on tasks that are less important. Some tasks feel urgent because of a deadline. Are these tasks important? Review your “bigger picture” plan. Ask yourself if the task on your to-do list will move your business toward the bigger picture. If not, scrap it or delegate it.

Fear-based pricing

You may have started your business thinking you should keep charges low so people will buy. But when you declare the value of a product or service, that is the value people believe it has. Be open to up your prices. You have more experience now and know how to provide a good service. Why not reflect that in your prices? Don’t just study what you’ve been earning, project what you could be earning. Don’t avoid change out of fear, in pricing, or anything else. Lack of change is another reason why businesses stay small.

Failing to hire the right team

You can’t grow a business without a process to hire high-quality employees and train them, to minimize mistakes and institutionalize high standards. If you don’t have the right talent, your revenue will always be limited. The team behind the business has to be strong enough to support a rapidly growing business. You need controls to deliver services on time.

Working yourself to death

The final reason why businesses stay small is that entrepreneurs often think they have to do it all. In the beginning, it’s a rush to be doing your own thing, and you will find yourself working (or thinking about working) all the time. But this is not sustainable. On an airplane, you are told to place an oxygen mask over your face before helping others. In business, you have to look after yourself first, too. Only then will you maintain your health and sanity enough to push your business to the next level. Don’t forget about delegation. There are writers, accountants, and virtual assistants readily available online 24-7. You should be thinking about outsourcing tasks or passing them on to your staff at all times.

Incorrect amount of risk

There are two kinds of risks in business. Both of them are dangerous for different reasons. There are business founders who take on too little risk. They invest too little time or money, and they never quite allow the business to reach its goals. Some entrepreneurs take on too much risk. When you take on too much risk, it might be impossible to recover. To grow a business, you have to be able to manage the risks you take.

Having the wrong mindset

You can’t grow a business without the required mindset. To grow a business, you must have a clear focus on growth. Everything you do, every decision you make must support growth.

Although there are some reasons why small businesses stay small, they are easily avoided with a little bit of effort.

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George Meszaros is the editor and co-founder of Success Harbor where entrepreneurs learn about building successful companies. Success Harbor is dedicated to document the entrepreneurial journey through interviews, original research, and unique content. George Meszaros is also co-founder of Webene, a web design and digital marketing agency.