Seven Common Small Business Mistakes and How to Deal With Them
Keep in mind that more start up businesses fail than succeed, but those who follow this advice are more prepared to ward off unnecessary blunders than wind up in bankruptcy. Mistakes are inevitable, but the best defense is learning from other’s failed efforts and when wrong, promptly fix the problem and trudge forward. Check out these seven common small business mistakes and how to deal with them:
1. Planning To Fail By Failing To Make A Business Plan.
Developing a business plan is the first step towards success in starting your own business. The most successful small businesses are those who have a sound idea paired with a well thought out business plan. Think of your business plan as a blueprint that defines your goals, keeps you focused and helps to overcome obstacles that inevitably pop up. A solid business plan will serve these main functions:
- It will serve as a summary of objectives and goals that will clearly depict an overall picture of the nature of your business. Potential partners and possible investors will want to see a business plan before investing their time, their money, or both into your venture.
- Will help you to better manage your business once you’ve started. Your business plan will serve as a guide as you evaluate and analyze your progress, both good and bad.
- A growth model. As your business thrives and grows, your business plan will be a roadmap to expansion. Whether you need to hire more employees, mainstream automation, or lease larger office space, your business plan will serve as a tool to help you manage these challenges.
2. Not Raising Enough Money.
Capital can be hard to come by, especially when the economy is vulnerable. Quite honestly, most small businesses piece together their funding from several different sources over a period of time. Initial funding is comprised mostly of friends, family, and business connections before moving up to the big leagues and looking for angel investors. Most startups make the mistake of underestimating expenses in the initial planning stages of budgeting. Somewhere and at sometime, they can’t pay the bills because they haven’t budgeted conservatively or planned for emergencies. Be sure to have enough money raised that meets and exceeds a realistic budget. Be sure to have a line of credit opened for emergencies. Having trouble raising capital? Check out these go-to tips for raising dough.
- Self-funding. Self-funding can consist of savings accounts and zero interest credit cards to leveraging other personal assets. Investing your own money might be your only option in the beginning until more formal funding sources reveal themselves.
- Your network. Friends, family, and your network. Be sure to protect yourself and your friends from any legal matters so that personal relationships aren’t as likely to be compromised if things get sticky.
- Small business loans. Being armed with a good business plan, profitable projections, and some of your own money in your business will help when you attempt to battle it out for a small business loan.
- Angel investors. The reality of achieving funding from angel investors remains mostly with leveraging the right contacts and good timing. A business’ success can be enormous if you are able to demonstrate your business plan, back up your valuation with real projections, and build a relationship based on trust.
3. Thinking You Don’t Need a Website And Facebook Fan Page.
Many small businesses think they can do without a professional website. This is one of the greatest mistakes a start up can make. In our digital age, potential customers turn to the Internet for information and opinions and if your business is not in this space, there’s a relatively low expectation for success. A Facebook page is free and your business needs to have a presence. While your website is under construction, focus on creating a Facebook fan page and get the buzz started. Potential partners, employees, and investors will want to see what others are saying about your service or product. Reviews on Yelp will also help with promotion as Yelp always ranks high in the Google search results.
4. Skipping The IRS.
Another grave mistake small businesses make is thinking they can get around paying taxes. They couldn’t be more wrong. Many small businesses have been shut down for good because they have failed to pay the IRS on time. If you missed the tax-filing deadline or expect that you won’t file on time due to extraneous circumstances, you can file for an extension with the IRS. This gives you until October 15 to file your taxes. Still having a challenge paying your taxes? Penalties can lead to additional expenses with great consequences. Even if you can’t pay your taxes, you still need to file your taxes or at least file for an extension. This lets the IRS know that you are aware of the situation and you are trying to resolve it. After you file your taxes or file for an extension, you need to communicate with the IRS and try to negotiate a payment plan so you can pay the IRS your taxes, according to cashmoneylife.com.
5. Skimming The Surface Of Market Research.
Market research is an essential component for any starting business and many businesses make the mistake of just scraping the surface. Digging deeper will help you to determine if your business will be a profitable endeavor. If signs don’t point in that direction, it’s wise to revisit your business plan. When doing market research keep these three ideas in mind:
- Understand your customer base. Who are your potential customers and is there enough demand to sustain your business idea?
- Keep your business model relevant. Markets change and change often. Is your idea current? Can you meet the needs of the rapidly demanding face of your industry?
- Know your competition. How are your competitors doing and what part of the market are they dominating? Is there enough pie to go around or can you capitalize on one or more of their flaws and jump to the top?
Even after your business gets up and going, market research is never ending. It needs to be a part of your regular duties. Shop the competition, stalk their social media pages, and keep a radar on emerging businesses invading your territory. Small businesses and entrepreneurs don’t need to spend a considerable amount of money on market research, but time and effort is vital.
6. Avoiding A Marketing Plan
How you choose to market your business should be based on market research and a strategy that will best serve your customers. A marketing plan focuses on the four Ps:
- Product. Who will buy it and why? Who is your competition?
- Price. What is the pricing strategy?
- Promotion. What is the advertising strategy? Will you use radio, print, or Internet advertising, content marketing, or a combination of various marketing channels? Be smart with your spending dollars and don’t let savvy salespeople push you into a costly marketing campaign that might not be suitable for your business.
- Place. You’ll want to take a look at SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats. Don’t be afraid to modify your plan according to what is working and not working.
7. Betting On A Dream – Blowing Off Reality.
Are your expectations in line with reality? Many small business owners are the victims of self-sabotage. Many businesses fail because the owner’s expectations just weren’t in line with reality. Let’s face it, customers aren’t going to be knocking your door down like they will for the latest version of the Apple iPhone. A great misconception is that you’ll be profitable right away. With all of the expenses, unexpected issues, equipment, payroll, etc., that you will incur to get your business up and running, you may not even turn a profit for a few months or even a year depending on your start up costs. Freedom running your own business doesn’t mean that you are going to be working any less than you did working for someone else. Odds are you will be working at full capacity and a vacation might not be a realistic luxury for at least the first two years.
Starting a small business comes with inherent risk, but also big reward IF done right. Even the big guys, like Rick Marini, Marc Andreessen, and Warren Buffet, didn’t get where they are because they were afraid of taking risks with their ideas. But one thing is for sure, if you asked them, they’d probably say that they made their fair share of mistakes along the way. What’s great about running a small business is that we can learn from these masters as they put their lessons out in the universe for young, vibrant, and talented entrepreneurs to learn from. Avoid these seven common mistakes and most of all, embrace them, your business is a journey.
