Starting a small business is a big and daunting task. Small business owners often make common mistakes, especially in the beginning. As a result, startup after startup goes up in flames. Many of them were great ideas but they were never able to prosper because they were cut short by preventable pitfalls. Read on to find out the top small business mistakes and how you can avoid them.
1. Trying to Do It All Yourself
The most common mistake entrepreneurs make when starting a small business is trying to wear too many hats. You may be good at many things, but you can’t be good at everything and one person simply doesn’t have enough time in the day to do everything required by most small businesses. You need to know when to hire people, how to hire the right people and how to solve the classic problem of needing to hire someone but not having the revenue to do so. Add people to the team that have strengths that you don’t and that are better at their designated jobs than you would be.
2. Not Setting Goals
When starting a small business you need direction, otherwise your company is like a moving train without railroad tracks. One of the most important factors in getting a startup on its feet is correctly setting goals. This means your goals are SMART goals; specific, measurable, accountable, realistic, and timely. And most importantly that they are outcome-based. Everyone needs to be on the same page with what your company’s ultimate outcome or destination is.
3. No Budget or Financial Plan
One of the most common reasons for the downfall of many businesses is they didn’t have a financial plan. Starting a small business will most likely cost a lot more than you anticipate, so it’s very important to set up a budget and have a contingency plan. Many entrepreneurs will come up with an idea and make the mistake of acting impulsively, diving right in without a business plan or financial plan. And when you don’t plan out the means of getting funds and how much spending you’re going to be doing, your business can spiral into disaster. Taxes are another important task you must pay strict attention to and do correctly.
4. No Marketing Strategy
You could come up with the cleverest idea for a business or the most amazing product, but if you don’t know how to market it right, it will flop. Marketing is not just getting the word out about your business, but constantly reminding customers about your business. You need to be marketing with a clear, consistent message as an incentive for buying your product or service. Don’t make the mistake of assuming you don’t need to market because business will come to you. People need to know your business or product exists. And not just anyone; the right people. Which leads us to the next common small business mistake that can have a potentially devastating effect.
5. Not Knowing Your Target Audience
Every business needs to have a target audience. When starting a small business it’s your job to do market research to identify your target audience and learn how to market to them. Marketing to the wrong audience is a waste of money and won’t bring sales. Not marketing to any audience in particular is like throwing brochures out your window and hoping the right people will find them and buy your product or service.
6. Underestimating Competition
Even if you think your business is original and unique, there’s always going to be competitors. Sometimes your competition is just the inertial of the status quo. Competition can be defined as anyone offering alternatives to what you are offering or competing for the same consumer dollars. Always pay attention to market changes, and be on top of customer expectations which may change along with evolving trends such as technology, etc. If you don’t evolve along with these changes, other companies will, and your customers will most likely migrate over to them.
7. Cutting Prices
Many businesses think that during hard times they need to cut their prices. Wrong! Prices that are low often mean one thing to consumers; your product or service isn’t worth any more than that. Don’t kill your profit margin and your market perception at the same time. Instead, consider raising prices and finding the customers that are willing to pay top dollar for a higher-quality offering. Fewer high-paying customers is often a much better strategy to success and a lot of low-paying customers. Only large companies like the Wal-Mart’s of the world make a viable business out of being the low-cost leader.
These are seven common mistakes small businesses make. There are of course others. Many of them fall into the category of failing to have a good plan. When starting a small business, a core principle is planning ahead and planning for all possible roadblocks you can think of. It’s helpful to keep in mind the old saying that “If you fail to plan, you plan to fail”. Be aware, and be prepared. Running a business is a daunting undertaking and you will make mistakes. If you follow these tips, hopefully you will make fewer mistakes and give your business a better chance of success!