You would not drive a car without driving lessons, but most people do not get ‘business lessons’ before they open a clinic
With the warm breezes changing to bitter cold winds and the threat of lockdown constantly lingering, it is worth reminding ourselves of one critical fact: how we run our businesses in the good times dictates how well we survive the bad times.
If your business has an ‘underlying health condition’, like inconsistent cash flow, high overheads, underperforming staff, idle assets and multiple debts, then your ability to weather the storm of an economic downturn is severely compromised. Furthermore, research has shown that 50% of new businesses fail in their first year and an astonishing 80% fail within 5 years—and that is data from before the pandemic!
This is a sobering reminder that the risk of business failure is now higher than ever—especially in the aesthetics industry. It is entirely possible that many people, even those that appear to have it all together, even some of the ‘big guns’ who seem to dominate the industry, could be a few bad months away from total collapse.
Businesses fold for fairly predictable reasons. The owners do not learn how to run a business (we would not drive a car without driving lessons, but most people do not get ‘business lessons’ before they start), some do not really get going, some get over confident, or complacent and many do not adapt and change. Owners retire, assets are sold, and competitors take over. It is a natural cycle of birth and death.
The key point is this: even if your aesthetic practice is thriving right now, if you address these common reasons for failure up front, you will be much less likely to fall victim to them yourself. Plan for the worst, and hope for the best.
Here are the top five reasons why businesses fail, as well as tips for avoiding them.
Impatience
Unfortunately, there is still a widespread desire to ‘get rich quick’. When it is not happening fast enough, impatience gets the better of the business owner, and that is when high-risk decisions are made that lead to an inevitable downfall.
The truth is that it is going to take more than one burst of energy and enthusiasm to implement lasting changes and get the results you want to see in your business—financially or otherwise.
Let's take marketing, for example. It is going to take more than one email, one social media post or one advert to compel a prospective patient to pick up the phone and call an aesthetic clinic. Numerous marketing methods exist, and there is no one method or magic bullet that works consistently all the time. A variety of ways and means to promote treatments and services will need to be explored and tested over an extended period of time. Think about it this way: the more times that a prospective aesthetic patient hears and sees your name, online and offline, the more they will trust that you are the perfect solution for them.
According to one of my favourite business authors and ‘gurus’, Daniel Priestley, ‘potential clients need to interact with your business for 7 hours, with 11 touch points and in four different ways before they will become a trusted friend or client’. So, how many online and offline marketing methods are you using—and how successful are they? Are you testing and measuring? Are you growing your practice using ‘hope referrals’ or relying solely on Instagram without any other tried and tested methods?
Remember, offline marketing is just as important as online marketing: you are a real person, running a real business, in a real local area with lots of other non-competing businesses who could work with you to cross-refer, network and share ideas. If you tried this before and it did not work, try again, as they could be more receptive about a potential joint venture since the pandemic. This is a long-term strategy and most people give up too soon because it takes time, but it is worthwhile persevering, as the more well-known you are in your area, the more chance of long-term success you will have.
» Success is a cumulative, compounded effect from dozens of simultaneous actions and constant daily habits, working together with a strategic plan «
Success is a cumulative, compounded effect from dozens of simultaneous actions and constant daily habits, working together with a strategic plan. As my business coach says, ‘getting rich is boring—it is consistent, daily habits that are implemented whether we feel like it or not’. Look back over all your proudest achievements in life and business, and think about how they all came to fruition. What was the difference that made the difference, and are you still doing them, or did you stop because you were so busy? Success leaves clues!
Erroneous assumptions
Quite simply, businesses very often fail because they were started for the wrong reasons. When the going gets tough, the owner gets despondent and abandons ship. Perhaps the owner just wanted to make a lot of money quickly, or perhaps they thought that they would have a lot more holiday time. Maybe it was even the thought of not answering to anyone else that is appealing for some.
If this sounds like you, you had better reconsider, as the reality is that this will not be the case, especially in the early days of the business. In these changing and uncertain times, I would only consider starting a new business if:
- You strongly believe that you have a competitive advantage. What is it about who you are or what you do that makes you more desirable than your competitors? You should be able to answer that question quickly and confidently
- You are healthy and well. This area is often overlooked by new business owners; however, bad health has been responsible for more than a few bankruptcies
- You are thick-skinned and you possess the much-needed mental stamina to withstand multiple challenges, conflicts and setbacks
- You are in it for the long term and are 100% committed to achieving whatever it is you set out to achieve.
- You do not allow failures to defeat you. You learn from your mistakes and use these lessons to succeed the next time around
- You thrive on getting things done. You are strict with your time and you know how to delegate appropriately and manage your team to maximise their productivity, potential and ability
- You do not shy away from difficult conversations or allow the wrong person in the wrong job to drift for too long without support, clear expectations and honest, straightforward communications. Remember: ‘you get what you tolerate’. What are you tolerating, instead of handling?
- You love what you do, and are passionate about your patients and the aesthetic marketplace and show this in your honesty, integrity and interactions with others. You are in it for the long term
- You genuinely love being around people and get along with all different types of individuals. However, you set the appropriate boundaries so that your team knows what is expected of it, your patients do not message you at inappropriate times of day (unless it is an emergency) and your family time is protected.
Playing it safe
Nothing is safe anymore. Change really is the new normal. Furthermore, to make it more interesting, the pace of change seems to be ever quickening. For those business owners who wish to not only survive, but also thrive, then there is no option to ignore change or to hope that what has been done in the past will be sufficient to cope in the future.
How can businesses thrive when faced with these challenges? Certainly not by doing nothing or ‘playing’ at change. The world has turned upside-down, you cannot hide and you cannot keep doing the same things that you have been doing and expect a positive outcome.
I cannot guarantee you that the next few months are going to be easy, but one thing I can guarantee is that, no matter what stage of the journey you are at, or how you are feeling today, things can rapidly change tomorrow. We could enter another long period of lockdown. Your rent could increase, or your landlord could sell. Your best-performing or most loyal employee could leave. You could fall ill (heaven forbid). A new competitor could set up shop right opposite your clinic.
As business owners, none of us can afford to bumble along and gett too comfortable as we settle for an average existence—and who wants average anyway? An average income? An average amount of time off? An average lifestyle? If we are prepared to settle for average, then we might as well close our doors permanently and return to full-time employment.
Management by abdication
There is a critical moment in your journey when you hire people to do the tasks that you do not know how to do, or do not want to do. Your newfound freedom then takes on an all too common form. It is called ‘management by abdication’, and it can lead to disastrous results.
» Many businesses go under because the magic that caused their growth and success was lost the very second that those critical activities were abdicated «
Take marketing, for example. Too many aesthetic practitioners want a marketing company to take on that role for their clinic, leaving them free to focus on the work that they know and love: consulting and treating patients. However, if you hand over a critical business task or a function to a third party and completely remove yourself from the picture, it is a slow road to ruin.
Many businesses go under because the magic that caused their growth and success was lost the very second that those critical activities were abdicated. When you hire any third party to perform a critical business task or function for your clinic, you are getting into a partnership. The results generated reflect how well that partnership is functioning. If you are not clear with your expectations and you do not regularly oversee what they are doing on your behalf, be prepared to accept the consequences.
The most common reason: financial complacency
The single biggest reason why businesses fail is because owners fail to run them profitably, and much of that is pure and simple negligence.
In good times, bookings are plenty, money pours in and cash flows easily. Yet, all too often, the owner's spending habits become more frivolous, and overheads, expenses and debts start to rise and profitability is left unchecked. All business owners need to manage their expenses carefully, but if you are a spender, ask yourself: ‘Do I need this, or do I want this? Is this going to grow the business or be a cost to the business?’.
Only when the warm breezes change to bitter cold wind is the true impact of financial complacency felt, and much hand wringing and whining about the economy is heard as business owners commiserate with each other. The truth is, failure to monitor net profit and profitability closely and constantly is negligence of the highest order.
Now more than ever, I strongly encourage you to focus wholeheartedly on increasing cash flow and profitability in every way you can, and never stop trying to find new and better ways to do so from every valid source of input, ideas and information that you can connect with.
Conclusion
Above all, please remember that minimising spend, managing your cash flow carefully and maximising your profit is not just an activity that needs attention when dire economic conditions occur, to be given temporary priority until things get ‘better’. It is supposed to be what anybody responsible for operating a business does every day. We usually run our business course in a live classroom setting, and at the end of the course, I always ask our delegates:
‘What do you know now (about maximising profit) that you did not know at the beginning?’
Then, crucially:
‘What are you going to do tomorrow as a result of what you have learned?’
Anything less is negligence.
I wish readers continued success and every happiness.