According to an often cited study from Ohio State University, 60% of new restaurants close their doors for good within the first year, with 80% failing within 5. While there are a number of factors behind this statistic, many of the mistakes business owners make are unfortunately avoidable. Noting this fact, Felix Clay of Cracked.com compiled a humorous list of 4 Awful Mistakes Restaurants Make All the Time. This article includes many solid points that should be taken as a lesson for anyone considering starting up a business, restaurant or not. These are the adapted 4 Business Mistakes to Avoid.
Parsa, Self, Kjite & King (2005), Why Restaurants Fail, Cornell Hospitality Quarterly, 46, 3
1. Location, Location, Location
Off the top of your head, can you think of a location that has had at least three businesses fail within the past few years? Just as an example, our office assistant Daniel grew up near an old Pizza Hut building that had been used for years as a successful Italian restaurant. After the owners retired and put the building on the market, however, at least three businesses have opened and failed in the same location. Just to name a few there was an upscale Mexican restaurant and a coffee shop. While no one would bat an eye at putting an Italian joint in an old Pizza Hut, the white table clothes of the Mexican restaurant weren’t fooling anyone. And no coffee shop in his hometown of Roanoke can beat Mill Mountain Coffee and Starbucks, who already dominate the market.
It seems obvious, but poor decisions made for business locations happen all the time. No matter how good your product or service is, you simply cannot just set up wherever you feel like without doing some extensive research. You need to know the economic market, demographics of the people living and working in that area, your competition, how many people drive past your establishment, and so on.
Your business needs to solve a problem for the area it is located in. There are no pizza joints in a 15 mile radius? Building one may be a good idea then. There are already five clothing shops downtown? You better make sure yours is different somehow. Which leads us to the next point:
2. Don’t be like Everyone Else
Photo Credit: Betsy Weber/Business of Software
A hot topic in business right now is differentiation, or what Stan Phelps of 9 INCH Marketing calls “Your Purple Goldfish.” What makes your business unique, or at least different enough from your competition to make people want to come to you? For example, it’s okay to have more than one restaurant in the same area, but yours has to be the best at something, whether that be the best hangout spot for a college crowd, the best bang for your buck, or simply the only Greek restaurant in the city. Every business needs to give customers a reason to come and continue doing business with them.
A great way to think about how to make your business stand out during your planning is to make a list of three products or qualities that your competition has to offer and then come up with ways to improve on those. Better yet, come up with three things you can offer that none of the competition have. Go to your competitors stores, take notes on what they offer, their service quality, what they excel in, did they offer a little extra, etc. Having a great product simply isn’t enough to pull people away from the shops and restaurants they already frequent. You have to stand out!
3. Don’t be lazy
Have you ever been really impressed with a business, only to be disappointed the next time you went due to bad customer service or poor quality? Often times this seems to be due to just plan laziness. Many businesses need a large number of people to keep everything running smoothly, but it only takes one person to start skipping steps, making mistakes, or rushing people to make clients and customers not want to come back.
Don’t let laziness and procrastination start running rampant at your business, and always be sure to give your customers an experience that will make them want to come back. While you simply can’t please everyone, recognize that it only takes a few poor customer experiences for bad word-of-mouth to spread, and bad reviews to appear online about you.
4. Don’t Try to be Everything
Photo Credit: Plantoo47
Like we touched on before, your business needs to be the best in your market area at at least one thing, whether that is the best warranties on your stock, the best quality of gadgets, the best nick knacks store on main street, etc. Many businesses, however, make the mistake of trying to offer everything. When they do this, they are spreading themselves to thin to the point that while they may sell a huge variety of goods, none of them are any good.
As an owner you must except that your business simply won’t interest everybody. The target audience for a local bike shop will inevitably be different than a bakery or a video game store. Instead of fighting this, embrace it!
Small businesses are all about finding both that niche audience and that niche product or service. Find your target market and work on making your business the most appealing to them. Find what is your highest selling product and make it the best it can be.
Make Your Business Succeed!
While it may seem obvious or common sense, these mistakes are made all the time and can be detrimental to any starting business. Remember these tips to avoid them and help your business succeed!