How To Ensure Your Small Business Isn’t A Failure Statistic This Year

While two-thirds of Americans dream of opening their own small business, recent data from the Bureau of Labor Statistics reveals that approximately 20% of small businesses fail in their first year, and about 50% of small businesses fail in their fifth year. Clearly, there’s great risk involved in starting a small business today, and many small businesses are not managed or poised to thrive through today’s challenges, for a variety of key reasons.

On the flip side, it’s important to understand that many do thrive. In fact, approximately 30% of small businesses will survive their 10th year in business.

To learn more about what small businesses can do today to ensure they’re doing what’s necessary to succeed and thrive, I caught up with Ginger Siegel who is the North America Small Business Lead at Mastercard. Siegel brings 30 years of industry leadership experience as an executive at large multinational and regional banks in the areas of small business, business banking and retail with a focus on strategy, leading execution, payments, treasury management, sales force optimization, branch optimization and revenue growth. Her focus is on people development, training and optimizing results through positive change management, and she’s passionate about helping create overall revenue growth and driving customer acquisition.

Here’s Siegel’s top advice for small business owners:

Kathy Caprino: What are the biggest trends you are seeing that impact how small businesses are faring in today’s world?

Ginger Siegel: Small businesses come in different shapes and sizes, but the challenges that they face are similar:

• Access – to credit and liquidity, as well as to new markets and customers
• Insights – information that provides visibility into the workings of their businesses
• Management – tools that help manage the day-to-day workings of the business, which includes cash flow, inventory management and bills that need to be paid

As consumers, small business owners use digital tools and platforms that make their personal lives easier, and now they are looking for similar digital tools when it comes to solving these challenges and running their business. Digital presence, e-commerce channels and acceptance of electronic payments are becoming table stakes for small businesses.

In addition, here are a few other trends that small businesses are considering:

#1: Digital solutions

…that help them automate day-to-day manual activities are becoming popular since small businesses don’t have a chief revenue officer, or a chief financial officer to look closely at important things like cash flow. Automated solutions that process invoices and pay suppliers and manage accounts payable and supplier payment process will increasingly become the norm.

Solutions with simple dash-boards that visually show their current cash position and forecast their position in the future will enable entrepreneurs to make better business decisions and take actions to mitigate their cash flow needs.

#2: Capital

Capital is essential for all businesses, but especially for small business. Alternative credit that started taking hold in developing markets is becoming popular among businesses in the more developed regions.

#3: Security

Security isn’t just for big businesses. Today, small businesses are looking for new digital tools that help safeguard them for fraud and cyber attacks. From fraud to business intelligence, there are a variety of analytics solutions and tools that small businesses can now use to address business challenges.

Caprino: Based on your experience, how can small business better identify and attract their ideal customers?

Siegel: Leverage your network of existing customers and create experiences that naturally turn them into storytellers. It’s important that small businesses really know their existing customers and deepen those relationships which will essentially build brand affinity and drive new customers.

To do this, small businesses can organize their list of clients using a Customer Relationship Management (CRM) tool. If they don’t yet have client information, they can start by asking for it at the point of sale or post sale, making sure to communicate why the business is requesting this information – which is to better serve the customer.

Big Data isn’t just for big businesses. Today, small businesses can take advantage of the massive amounts of online and offline information to make wise, data-driven decisions to grow, manage and future-proof their businesses. From fraud to business intelligence, there are a variety of analytics solutions and tools that small businesses can now use to address business challenges.

Caprino: What mistakes are small businesses making in terms of payment, credits, special offers, discounts and other financial policies and procedures?

Siegel: Customers value their time and they want businesses to do the same. Small businesses should focus on simplifying and shortening the checkout experience for customers. There are a variety of studiesthat show a high percentage of shoppers abandon the shopping cart before finalizing a purchase – this can range anywhere from 59.8% to 80.3%. Some of the mistakes that lead to abandonment include lack of payment methods, required registration and concerns about payment security.

Every opportunity to make a sale counts, and offering different payment options means never missing out on gaining a new customer. Small businesses should offer a variety of payment options, especially as contactless and digital payments continue to grow in popularity.

For online purchases, if you start the checkout process by requiring a new customer to register for an account or an existing customer to sign-in, you are setting yourself up for shopping cart abandonment. Anytime you insert a step between the decision to purchase and the ability to purchase, you create a barrier that may lead to the loss of a sale.

Consumer concern over security and fraud is continuing to grow and small business need to ensure that the payment processing is secure and to let their customers know that it is.

Caprino: What about expense management? What suggestions can you offer?

Siegel: Expense management is another critical piece of success for small business owners. They should look for financial services solutions that offer easier/more efficient tracking of expenses and spending. For example, spending controls on business cards that they provide their employees could keep expenses at check.

Small business owners often use their own personal credit cards for business. They should look into what business cards their banks offer as they could come with a more pertinent rewards programs that also open up loans or line of credit opportunities.

Caprino: What other key trends are you seeing in small business purchases, shopping and other trends and what can small businesses do proactively about these?

Siegel: Today, the physical and digital worlds are coming together. Brick-and-mortar retail is still important to consumers, and small businesses have to proactively work toward revamping the physical store to make the shopping experience as digitally savvy as the shopper.

Part of revamping the brick-and-mortar store is knowing your customers better than ever. Success will be measured by how well retailers can personalize and customize consumers’ experiences, and how they create a seamless, secure and better experience both in-store and online.

When it comes to payments, brick-and-mortar retailers need to be prepared to offer consumers contactless and/or omnichannel payment options. These payment options give consumers the ability to quickly and safely make a purchase via phone, in-app, through browser, and in-store, allowing brick-and-mortar retailers to compete with larger online retailers.

Caprino: You’ve mentioned the need to be a “disruptive entrepreneur.” What do see as the top qualities of disruptive entrepreneurship, and how can big businesses help?

Siegel: In today’s economic climate, every small business owner needs to be a disruptive entrepreneur. Running a small business is hard – owners wear multiple hats and often have to develop business or creative skills they did not learn in school. Disruptive entrepreneurs need to be ambitious, passionate and innovative in order to achieve sustainable growth.

Knowledge sharing is essential. Big businesses have the advantage of being able to share insights and resources to help small businesses improve their organizational structure, finance processes and management practices. These adjustments often lead smaller companies to upgrade their technologies, create workplace efficiencies and build on their financial stability.

Big businesses can also provide support to small businesses by offering entrepreneurship programs or financial opportunities through grants, matching programs, and funding initiatives. Small businesses are always looking for funding to support the growth of their business, and being backed by a big business is a great way to achieve this – and does good for both sides.

One of the ways Mastercard is doing this is through our Grow Your Biz Contest in support of the Bank of America Business Advantage. Last year’s inaugural contest called all Boston-area small business owners to pitch how they planned to grow their business for the chance to win $25,000 and one-on-one business expert advice. The goal of the contest was to help small businesses grow and achieve their desired potential. We’re excited to expand and continue the contest this year.

Caprino: What are the best tips you can give for growing a successful small business today?

Siegel: Here are some top tips:

Understand your customer more deeply

It’s important for small businesses to understand and focus on their customers in order to attract and retain business. Small businesses have an advantage over larger companies in flexibility and personalization. Take advantage of this!

Automate/digitize

Automate and digitize non-core activities (administrative, scheduling, billing, etc.) so that you can focus on what really matters.

Simplify and streamline

Simplicity is key. Ensuring that operations function as efficiently as possible to maximize value is the best way to avoid future mishaps and lags as you continue to grow.

Take smart risks

Be smart, but also don’t be afraid to take risks and lean on your professional and personal network for advice and opportunities.

Secure capital

Of course, securing capital is going to be the number one objective in growing a successful small business. Ask questions and adopt the best financial solutions that offer you what you need.

Overall, small businesses owners are highly stretched and have to find a simple and easy way to run and grow their business. Finding tools and technology that provide more control, visibility and ease will be critical going forward.

By Kathy Caprino, Forbes