Why Small Businesses Fail (And 5 Steps to Thrive Instead)

The reason small businesses fail is best exemplified by a networking call I was on the other day. Someone on the call introduced himself as a productivity expert.

With hyped-up energy, he hit the group with his pitch: work seven days a week, ditch holidays, take 12-hour days, 8 hours for sleep, and 4 hours for yourself. I will drive you hard, and you will hate me, but you can do more, and after six weeks of this, you will thank me.

Ugh.

But his approach pretty much sums up the MSP ownership experience: work hard, then work harder so that maybe someday in the future, you will be able to enjoy life and thank somebody.

The MSP ownership world steeps in this hustle mentality. All around us is a constant stream of hustle porn encouraging us to do more, hustle harder, try this, and do the other thing. This hustle culture is a significant reason why small businesses fail.

And the harder your try, the more you grind, and the more you hustle, the worse off you seem to be. There are many reasons why small businesses fail: but the core of all failure lies in not escaping the hustle.

The hustle is the reason why small businesses fail

There are many lists out there of all the reasons why small businesses fail. The list of the most common reasons why small businesses fail goes something like this;

• Lack of focus.
• Lack of vision.
• Lack of planning, they don’t have a business plan.
• No product market fit.
• Inventory mismanagement.
• Money mismanagement.
• Lack of capital.
• No niche.
• No marketing.
• No delivery.
• They didn’t send out their invoices (I’ve never actually seen anybody say this, but it is amazingly accurate).

All of these reasons are true.

And all of these reasons are incomplete.

They miss the point: the reason most businesses run out of money, don’t have a niche, can’t focus, and everything else is because the MSP owners hustle.

The reason why small businesses fail is that the MSP owners running the business get stuck doing work rather than building a business.

What MSP owners miss, what I missed for many years, what you may be missing right now, is that without building a business, you will get stuck in the cycle of good and bad days, weeks, months, and years. That stuckness is a trap; we call that trap the MSP ownership spin cycle.

The MSP ownership spin cycle is why small businesses fail.

Here is what happens. You are working hard trying to succeed at this MSP ownership thing.

On the journey, you run into someone with a solution that will make your business run better (maybe working 12-hour days with no holidays?), so you jump in.

More likely than not, the solutions works, and the person selling it to you is genuine. (Of course, since they are likely stuck in their own spin cycle, they can’t dedicate the time to the solution you deserve, but that is a whole other story.)

Since the solution works, you have some success, and things go well. Success creates more work, which diverts you from implementing the solution, so success wanes. Then you come back to it, leave it, and come back to it until you get sick and tired and shift to something new.

You probably assume that the solution you bought didn’t work. The cold hard reality is that the solution worked fine. It is your business that is broken. Since your business is broken, moving on to the next solution will not help either.

Each solution gives you a bump, but none changes your business.

Sound familiar?

Here is what is going on

You can lump all your work in and for your business into two buckets: delivering and overhead.

Delivering is the valuable work you do – it is all of the work associated with providing your product (all businesses sell products, even service businesses, but that is another conversation, if this is new to you, go with it for now).

Through delivery, you add value to your customer or client.

Overhead is everything you do that is not delivering.

Calling it overhead does not mean it isn’t essential; it just isn’t delivering value. Marketing, sales, invoicing, managing, delegating, deciding, changing out the water bottles, and any other activity that is not directly related to delivering value is overhead.

The MSP ownership Spin Cycle Exists within the delivering-overhead box.

The problem with all new solutions you (we) try is that they operate within this box. Every single solution that you implement consistently operates within the delivering-overhead box. It will help you work faster, create more, and do more.

A program that helps you work 12 hours daily applies more of your life to delivering and doing.

Sardonically, the program that automates your marketing does the same thing. You still have to build and maintain the automation.

I worked with one woman who tried to automate every aspect of her business with a collection of tools that could have left a virtual hardware store fully stocked for a year. This automation created an absurd amount of work for her just in maintaining the automatons. Her world became one of hardworking, non-value-adding automation tweaking.

The point is that even when a solution works perfectly, it creates more work than you can handle. More work means that you have to take your attention away from the tool and do other work, results wane, you go back to the tool, get too much work, and around and around it goes.

This waxing and waning makes both delivery and sales difficult and ends up being a core reason why small businesses fail and why small businesses fail to grow in general.

How to break free from the MSP ownership Spin Cycle

The only way to break free is to reimagine your business.

All businesses will start with delivery and overhead.

But creating a successful business that breaks free of the grind means building a machine. The role of the MSP owner is not to spin between delivering and doing with a constant flow of new tools or sacrificing your life in the process: it is to create the business machine.

All successful businesses build on a repeatable model that people, systems, and tools can deliver repeatedly. Having a machine doesn’t mean that you never deliver or never work on overhead, but it does mean that you have a machine that does a lot of the work for you.

Your small business will eventually fail if you don’t find a way to create a repeatable system. The reason why small businesses fail, or even why they stay small, is the lack of repeatability.

The machine reduces the amount of delivery and overhead you do. This gives you time to do other things from more delivery and overhead for more clients to going on vacation.

Building a business machine allows you to:

1. Focus on doing the parts of the business that you most enjoy.
2. Think about the future, plan, expand and adjust as you want.
3. Implement tools successfully without them taking over your life.

Building a business machine also reduces work in two ways:

1. through repetition, you reduce the amount of work there is to do. 
2. you delegate and outsource more work.  

Here is the funny thing: once you have created a business machine, those time-saving, business-building solutions can start to work. You can plug them in, try them, and as they generate work, the machine handles it.

Those automations that tie together and save time are in; those that don’t are out. And it is through building the machine that you can tell.

Okay, great, yay machine, but what is it?

I am so glad you asked.

We will be creating more content on the machine, but for now, here is the outline.

A machine is a consistent way of operating. It defines one product (yes, product, even if you deliver a service) that you sell to one customer. Once you get one product to one customer working, then you can add products and customers.

Think of it as building a franchise.

Starbucks just sold coffee to Seattle suburbanites. Once they nailed that, they expanded both their product offering and their scope. Now they sell a whole range of related products to coffee drinkers around the world.

The beginning of Apple was a box that allowed users to make free long-distance telephone calls. Now they are a trillion-dollar company that sells phones and charges a fortune.

The key to building your machine is not implementing another solution; instead, it is defining what you do clearly and definitively. You create a franchise even if you don’t ever want to franchise your business. The franchise machine is what stops the grind.

The broad steps to creating your machine are:

1. Define your target market and the value proposition that you deliver to them.
   
2. Create your business model around that value proposition. The business model defines what you do and don’t do. It also helps you identify the tools, partners, and solutions you need to improve your business.
   
3. Define your compass, that is, your values, vision, mission, and strategy.
   
4. Plan your work, and create 90-day and 30-day plans that define success. Creating a plan breaks out of the cycle of working hard on many things that end up not working together.
   
5. Measure your performance against that plan and make adjustments as you need to. What gets measured gets managed, so develop the habit of measuring yourself against your objectives. Metrics will help you focus while also giving you valuable feedback on what works and what doesn’t.

There are more details, and I will be writing more on this concept, but this is what we do at Start Grow Manage. We want you to build a machine.

We will offer you tools and tactics, valuable ways of working, and “solutions.” But at the core of everything is the machine. Start there and then build on what works and create a business that allows you to live an extraordinary life.

Or, you work 12-hour days, foregoing holidays, and grind until you eventually collapse. I’d be happy to introduce you to someone who can help with that.