8 Reasons IDD Small Businesses Fail
The Small Business Association (SBA) defines a small business as one that employs less than 500 employees. No-one creates a business wanting it to fail, yet many do. Typically, 20 percent of small businesses fail in their first year, 50 percent in their fifth year and 70 percent after a decade of being in business (SBA Office of Advocacy). Though healthcare and social assistance businesses do marginally better than other industries companies, those providing IDD services and supports still need to avoid the very common pitfalls many small businesses fall into.
1. Poor Cashflow Management
Failure to manage cash flow is the primary reason most small businesses (a whooping 82%) collapse. Cash is the life blood of every business. Relentlessly seek out and implement high-value high-efficiency tools that save you time and money such as the Focused EHR. Each IDD service business must have enough reserve cash to weather the ebbs and flow in your businesses revenues. Even in an industry such as IDD or special needs where the state is frequently a payer and therefore unlikely to go bankrupt (yes – I realize California exists) each company offering IDD services and supports must still have enough cash on hand to see to emergencies such as hiring temporary contract staff, replacing infrastructure, responding to natural disasters or paying upfront consumer healthcare bills.
This is especially important very early on in the business’s life span where startup costs must be accounted for as well as the cash to keep the business running for the first year or two. It is worth considering the value of advice from a professional financial adviser.
Lack of proper planning is another common reason small IDD companies fail and go out of business. Many IDD service business owners set up their business with their natural compassion, enthusiasm and drive to provide a vulnerable population with the care they deserve. And that passion and positive mindset will keep them going when others give up. However all too often, entrepreneurs focused on achieving their dream of altruism and financial independence fail to take the painstaking but necessary step of creating a strategic business plan that factors in components such as workforce needs, analysis of competitors, sales and expense forecasts and marketing budgets. And if they lack these skills they fail to learn the new skills needed to run an IDD service business successfully.
To better ensure success, take whatever time you need to create an effective business plan. There are many helpful software packages that make the job easier and faster. It doesn’t have to be really long even a one-page plan is better than none and can be very helpful in improving the chances for your business’s longevity.
Effective management and leadership skills are essential to business-building success, and a lack of either can lead to confusion and conflict within the ranks, poor morale and reduced productivity.
Make it a priority to acquire the skills needed to strengthen areas where you know you are weak. Educate yourself on leadership by reading books from Peter Drucker and Sheryl Sandberg as well as blog series like this one. Your employees look to you for leadership — so lead!
More than one IDD service company has experienced bankruptcy as a result of the business owner’s reach exceeding his grasp concerning expansion.
Decide about expansion only after carefully reviewing, researching and analyzing what you will need regarding new employees, facilities and systems. While it may be feasible to do much of the work yourself early in the life of your business, that won’t be the case after your expand. Just keep in mind, slow and steady wins the race.
…..those who venture to criticize us perform a remarkable act of friendship, for to undertake to wound or offend a man for his own good is to have a healthy love for him – Michel de Montaigne
Many companies go out of business purely because the owner failed to promote and market. The “if you build it, they will come” mentality doesn’t work in an age when consumers can choose from among a multiplicity of options. You have to get your message seen and heard (if you haven’t already done so read our blog from last week on brand management for the IDD service provider).
While traditional methods of advertising are still useful, one of the best ways to market your business is with a website. As of 2016, nearly half (46 percent) of all small businesses did not have one. So just by creating a site, which can be a do-it-yourself effort for as little as $12/month you put yourself ahead of many of your competitors. Again see our brand management blog from last week on how Focused Software can help give visitors to your site a better experience.
While you’re at it, you might want to think about setting up profiles on social networks where your customers gather. However there are potential pitfalls here (again check out last week’s blog!)
You’ve heard of the term, “Unique Value Proposition” (UVP, for short). That describes the qualities, characteristics, products or services that differentiate a business from its competitors. The problem is, almost no businesses offering IDD services and supports actually have a UVP, or they fail to make clear what theirs is — probably because they don’t know themselves. Now we understand that in highly regulated environments like that of IDD and special needs services trying to doing things differently while obeying all of the regs can be challenging but if your team uses it’s imagination you can create UVPs eg become a niche provider who is focused on consumer education, or employment rights or known for fun interactive and educational day hab activities – just choose to distinguish your company at something.
To determine your value proposition, you must think hard about how your team creates value for your clients. Once you know the UVP, communicate it clearly, to consumers, consumer advocates and your staff.
Entrepreneurs can often be their own worst enemies in that they seek to do everything themselves.
As an entrepreneur, you may think, “No one can do it better than me.” Or, “If you want something done right, you have to do it yourself.” Or, “I can’t trust anyone else with this responsibility.” That attitude can lead to a sense of being constantly overwhelmed and burned out as well as generate feelings of frustration, resentment and underutilization in your staff.
The remedy: Learn to delegate. This can be delegating busywork, work that will help other staff members grow professionally or work that others can do just as well or better than you. This will leave you time to concentrate on the tasks that contribute to the growth of the company, like casting vision and grooming others for positions of leadership.
Even if you have a sound business model, plenty of funds to operate and the necessary management skills to be successful, you still face one daunting challenge: the competition.Also, you have to consider disruptive startups who may be building a better, cheaper, faster, more convenient, higher-quality mousetrap.To increase your chance of success, conduct ongoing competitive analyses as part of your overall market analysis. Assess your competitor’s strengths and weaknesses and implement strategies to improve your competitive advantage.
FOCUSED SOFTWARE CAN HELP! Optimize your workflow and staff efforts with the EHR developed just for IDD service providers! You’re really planning for success (which means avoiding failure) with Focused Software. Your documentation is centralized, you can track services more accurately, and improve cashflow, while it helps save you money and reduce the administrative burdens of managing your office. All of these benefits work to boost your agency’s chances of success.
After you’ve read through this blog, take a deep breath, let it out, develop a brilliant plan, and click on the big orange button below to schedule a demo today!