Ten Mistakes to Avoid When Starting a Business
Mistake 1: Not Doing Market Research
Before starting any business, you should do some market research to identify if there is demand for your product or service. If there is, how much are people willing to pay for that product or service? Can you be profitable at that price? Is there a lot of competition crowding the market? Anytime you start a business, you’re taking a risk. You can mitigate that risk by understanding the market you’re up against and ensuring you’re set up for success.
Mistake 2: Not Creating a Business Plan
Failing to plan is planning to fail. A business plan is not just a necessity for investors, but it’s actually a necessity for you. A good business plan serves as a guide to help you navigate each stage of starting and managing your new business. You can use it like a GPS for how to structure, run, and scale your company. It helps you think through all the key elements of how your business will run.
Mistake 3: Ignoring the Competition
As business owners, I believe we must stop viewing the competition as an enemy that we can slay, but instead, as a worthy opponent. This shift in perspective creates a mindset where we can be more strategic in our approach to entering the market. We can ask ourselves what our competitors are doing well, and where there are gaps in the market. Once we identify those gaps, we can aim to fill them, ultimately offering a premier product or service.
Mistake 4: Not Understanding SWOTs
Too often, we encounter new business owners who fall on one of two ends of the spectrum. There are the excited new business owners who think their new business is invincible, and then there is the skittish new entrepreneur who isn’t sure if they’ve really got what it takes to compete. In both cases, a simple SWOT analysis of your business can help you identify core truths about your businesses S-Strenghts, W-Weaknesses, O-Opportunities, and T-Threats.
Mistake 5: Not Developing a Strong Brand
While this is listed as number five, this is probably one of the most common mistakes we see. We often have businesses come to us wanting help with marketing, but they’re not ready for it. For marketing to operate the way it should, providing a return on investment, there are some brand foundations that must be in place first. Without those brand foundations, your marketing will fail to resonate with consumers. This can often result in marketing efforts that cost more than they generate in revenue, which is a recipe for failure. To develop a strong brand, you have to consider your company to be it’s own entity. It has it’s own image, it’s own personality, it’s own voice, it’s own style of communication, and it’s own values. All of these things come together to create a brand that is consistent and memorable.
Mistake 6: Avoiding a Marketing Strategy and Budget
I cannot say it enough. Running a business without marketing will kill it. Marketing is how you get the word out about your business. It’s how consumers learn about you. It’s important to note here that marketing is not simply advertising, but rather, advertising is a form of marketing. This means, for you boot-strapping entrepreneurs, that marketing doesn’t have to break the bank as you’re just starting out. It does mean, however, that you must have a strategy in place to get the word out to the people most likely to buy from you.
Mistake 7: Not Properly Budgeting Startup Costs
Surprisingly, we find a lot of new businesses didn’t properly plan for their startup costs. When you’re considering starting a new business, you need to not only consider the cost of equipment and materials, but also the cost of facilities, team members, marketing, licensing, taxes, marketing, operations, softwares, and so much more. Find an accountant that specializes in small business needs to help you navigate some of the unknowns.
Mistake 8: Scaling Too Slowly or Too Quickly
Growing a business is hard work, but it’s easier when you build a business with scaleability in mind. If your business is constantly turning away new customers who are having to go to your competitors, you may be scaling too slowly. Alternatively, if you’ve invested in new staff and equipment that you can’t keep busy, you may be scaling too quickly.
Mistake 9: Lack of Delegation
This is a big one. And sometimes I think it boils down to a lack of trust. While entrepreneurs often wear many hats, there comes a time when you have to learn to delegate certain tasks. I always advise my clients who are having to start delegating to start by delegating their weaknesses. For example, if you’re not the best at maintaining your bookkeeping, hire a bookkeeper to help. If you’re to busy to maintain your marketing efforts, hire an internal marketer or an agency to help you make sure it doesn’t fall through the cracks. Focus on what you’re good at, and trust experts to work on the things you don’t have time for.
Mistake 10: Not Handling Finances Properly
The mismanagement of finances can be a huge detriment to any business, especially a new one. There are a few basic things you can do to set yourself up for success from the start. For example, you should never co-mingle personal and business money. Instead, you should always have separate accounts. Any money you put into your business should go into your business account as an owner’s investment. Any money you pay yourself out of the business should come out of your business account as a salary or owner’s draw. Again, working with an accountant or CPA will help you avoid some of the biggest, most costly financial pitfalls businesses face.
According to the Bureu of Labor Statistics, 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more. In our experience, avoiding the mistakes listed here will help you navigate many of the challenges that cause new businesses to fail.