Why businesses fail (part 3): they don’t attack an important customer problem

We’ve all seen it. An entrepreneur opens a new business, but before long we notice it’s closed.  They ran out of money before the business broke even. The time and money they spent is gone, and their lender may have a claim on their home and other assets.

How does this happen? 

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Third, they didn’t attack an important customer problem, or satisfy an important customer need. The customer or prospect isn’t very anxious to solve their problem. They may have found a work-around that is acceptable for now. They will procrastinate if you ask them to buy, and when they finally do, they will look for the cheapest solution. Not a good market for your business: long buying cycles, low conversion rates, and constant pressure on margins.

What should you do instead?

  • Look for a segment of your current target market, or an entirely different target market, that has an important problem you can solve, or an important need you can satisfy. If you were originally planning to offer a car washing service, focus on people who get a real benefit from a clean car, like real estate agents, executive limousine services, and people who want to sell their cars. If you were planning to open a small book store, offer a subset of books that aren’t available on Amazon, like antique and rare books.
  • After you choose your new target market, you need to reach out to target market customers. Meet with as many of them as you can. If these customers have an important problem or need, they have probably found a solution already. Executive limousine drivers are not driving around in dirty cars. People who want rare books are probably not waiting around for someone to open a new small book store. But they may think their current solution is too inconvenient, or could be improved to better meet their needs, or is too expensive. For example, they may go to an antique book store, but they have to drive a long way to get there. Find out what it would take in terms of delivery or features to make them switch to a new company.

SCORE counselors are available locally or on-line to help you create and manage a successful business. Call us in Pinellas County at (727 532-6800 or go to  www.pinellascounty.score.org.