“How are things?” This is a question I often ask small business owners, driven by my love of shopping with anyone who will oblige. The answer is usually veiled in general optimism.
The answer should probably be, “Things aren’t going so well.” You’ve probably heard the statistic, “Half of all businesses fail.” More specifically, Forbes reports that 20% of businesses will fail within the first year, and 50% will be gone by the fifth year.
But why? Is it really that hard to keep a job? Maybe it is. Almost half of business failures occur due to lack of demand for the offered product or service, according to Forbes. It may seem like a no-brainer to make sure you’re offering a product people really want, but reading consumers’ minds isn’t easy. None of us have the natural ability to know the thoughts of others. The only way we can find out is to ask, and it’s impossible to ask everyone.
After a lack of demand, Forbes says that more than a third of business failures are due to capital depletion. It is difficult to predict costs in business because there will always be unexpected costs. Most of us can empathize with the lack of cash flow. Also consider the American Customer Satisfaction Index, an economic measure of the quality of goods and services experienced by consumers. Measured on a scale of 0 to 100, the index has never reached 80, indicating that consumer satisfaction has plenty of room for improvement. Anyone who has worked in customer service knows how hard it is to please everyone.
This issue is important because the success of a small business affects everyone. According to the US Small Business Administration, our country has more than 33 million small businesses, which is 99% of all business entities. Collectively, these businesses employ nearly half of all workers in the United States. Furthermore, 80% of small businesses are owned by just one person. These figures demonstrate how close small business is to each of us. Chances are, we work for or care for one of these fragile businesses. The good news is that we have the power to help these businesses.
Think of all the skills you need in life that you didn’t learn in school. Maintaining your credit score, changing a tire, and cooking are things most of us have to learn on our own. Managing a business is often the same. Many small business owners are self-employed because they have the opportunity to use their unique skills. What restaurateurs, plumbers, and retail store owners typically don’t learn much about in their training is how to run a business. Driven by passion, most experiment with the hope of learning enough about running a business to keep it afloat. As consumers, we must empathize with these issues based on our own experience in everyday life.
Management textbooks like to discuss the characteristics that managers should possess. In my opinion, the most important quality of a good manager is often overlooked: humility. Good business owners know they are not perfect. They want to improve, and successful ones are hungry for feedback. The problem is that the desire for continuous improvement is often one-sided. Consumers typically do not provide feedback on their experiences with regularity, whether good or bad. Maybe it’s time to change that practice.
I suggest that we as consumers participate and provide feedback on our experiences more often. If you received great service or your product experience exceeded expectations, please leave a comment. Knowing what is being done well can help businesses stay on track. If you see ways to improve your experience, please share. Sometimes businesses won’t realize that customers are unhappy until someone points it out. Doing so provides an opportunity to correct and become better. In any scenario, our contribution as consumers can strengthen the local economy we rely on.
The nature of business is imperfect. It might do us all good to embrace the notion that good business requires a little help.
Dr. Dave Hickman is Associate Professor of Management at Columbia College’s Robert W. Plaster School of Business.