An anecdote that appears in many business books tells that if you drop a frog into a pot of boiling water it will jump out immediately, but if you put it into a pot of cool water and then bring the liquid to a boil, the frog will acclimate and won't notice the danger. Aside from the question of whether this insight is true (or whether it's a terrible thing to do to a frog), this anecdote reflects a vital component in any business survival plan: pay attention to small changes before they turn into insurmountable threats.

Tip

Your business survival strategy should be a combination of careful thought before making crucial decisions and agile adaptation when things don't go as planned.

Business Survival Rates

Running a small business is tough. If it weren't for the pride of creating something uniquely your own, the satisfaction of being your own boss and the potential to actually make it big, it would be hard to imagine why anyone even tries. Varying statistics say that only five percent of startups make it to the five-year mark and 90 percent of businesses don't even last three years.

Like the boiled frog anecdote, these numbers are questionable but also useful. Statisticians and government agencies may have problematic definitions of what it means to be in business, from a revenue threshold to operating continually under a certain name or business license. But many small businesses operate under the radar or reinvent themselves with different names while making use of older insights and infrastructure. Nonetheless, running a business is tricky and requires ongoing adaptation if you're planning to survive.

Survival Strategies in Business

  • Diversification. A business model is like a stock portfolio. Financial planners emphasize the importance of investing in multiple types of financial products such as stocks, bonds and money market accounts so that if the financial climate is unkind in any one of these areas, you'll have other resources to cushion the blow. Similarly, if your business offers a range of products to a broad range of customers, you'll insulate yourself from the fallout if one of these areas hits a rough patch.
  • Increasing Revenue. There are an unlimited number of ways your business can bring in additional income, provided you're resourceful and creative. From introducing new products to cultivating new markets, it's best to never grow complacent and always keep innovating. Even if you're satisfied with what you're currently earning, you should always be thinking ahead and anticipating new hurdles that will inevitably come your way.
  • Cutting costs. It's not enough to just increase your revenue if you do so by implementing changes that cost as much as they earn. Take a serious look at every aspect of your business and evaluate whether there might be ways to tighten things up and improve your bottom line. Can you make your production more efficient or find less expensive sources for key materials? The more thought and energy you put into answering these questions, the more opportunities you'll find.
  • Improving cash flow. No matter how brilliant your ideas, you won't be able to implement them unless you have enough cash on hand to keep your company operating. Innovating is expensive, but in the meantime, you inevitably have employees and suppliers to pay. Work with your customers and provide incentives for them to pay you promptly. Secure low cost lines of credit if you can, and always keep some cash on hand for emergencies.

Business Survival Mindset

Your business survival plan shouldn't just be a matter of developing and implementing specific strategies. The very nature of entrepreneurship requires you to be mindful of survival issues from the outset and on a daily basis. There's a common myth that entrepreneurs are risk takers. In fact, entrepreneurship requires you to constantly evaluate risks and thoughtfully assess when to proceed and when to refrain. Your financial and emotional survival depends on this ongoing evaluation.

To cultivate a mindset that will set your business up for survival, treat every business decision you make as relevant and important. Business survival shouldn't just be reactive, or a response to difficult circumstances, but proactive, setting you up for fewer crises and a less frequent need to scramble.

This is not to say that running a business is always fraught with difficulty and struggling to survive. If you plan carefully and conscientiously monitor what's going on in the different parts of your operation, you'll most likely have periods of healthy growth and times when everything runs smoothly. But don't become complacent even if you have no current major headaches. Instead, think ahead and stay on top of internal and external threats that could shake up your hard-earned stability.

Day-to-Day Business Survival

To ensure day-to-day business survival, it's important to have an ongoing understanding of what's going on in your operation. This requires a careful balance between hands-on management and delegating crucial decisions and tasks to people you trust to do them well and keep you informed about developments and challenges.

Staying on top of your books is especially important. Whether or not you do your own accounting, you should be able to understand and interpret basic financial statements such as profit and loss, cash flow and balance sheet. These documents provide you with an overview that will help you catch difficulties that are starting to develop. If you monitor your cash flow carefully enough to foresee that you may have a short-term depletion of funds, you can come up with a short-term solution before you are unable to pay your suppliers and you end up without the supplies you need to earn the income to address the shortfall.

In addition to conventional business statements, you should also practice management accounting, or the process of gathering and analyzing data which will help you to keep your business afloat and healthy. Develop metrics for tracking productivity and understanding which processes and products are most beneficial to your bottom line. Learn to recognize patterns, make improvements and then track the results of these innovations.

Business Survival in a Crisis

Despite your best efforts to manage your business in ways that will help it survive and thrive, there will be times when threats and problems require immediate attention. These difficulties may come about because of something you've done while running your company such as hiring an ineffective manager or introducing an ill-fated product. Alternatively, they may come about because of something beyond your control such as an economic downturn or a well-funded competitor.

Whatever the cause of a business crisis, you may have to take measures to address it that you wouldn't take in ordinary circumstances. It makes sense to take out a high-interest loan if you have no other alternative. Similarly, you may find yourself working longer hours than your body or your family can handle because the extra time is necessary for getting your business back on its feet. Recognize the difference between short- and long-term strategies and be proactive about avoiding long-term emergency measures.

Once you've helped your business survive a crisis, it's time to get back on the path of day-to-day survival. Develop and stick to mindful and healthy habits and teach your staff to do the same. This practice won't help you to always avoid crises but it will make it much easier to manage problems when they arise.