Countless business articles and journals discuss common mistakes business owners make when starting their businesses. I’ve also learned a thing or two (or 10) about these types of mistakes from successful entrepreneurs and a variety of news sources for small businesses.
Read on to learn about these 10 common mistakes, and how you can avoid them when you start your business.
1. Market misread
A good idea can be just that, and nothing more. As an entrepreneur, you must assess and understand the true demand for your product or service before taking the idea further. Nabeel Mushtaq, chief operating officer (COO) and co-founder of AskforTask.com explains, “Whether it is underestimating [or] overestimating costs, appealing to the wrong target demographic, or poorly gauging the demand, misinterpreting your market can end your business before it even starts.”
Entrepreneurs often expect their ideas to start making money immediately. In reality, it takes time for word about a product or service to spread, and even longer to reap a profit from a new business. Know and plan for the fact that it takes time to get your business off the ground. Perform a break-even analysis to estimate how much your business must make to go from being a source of financial drain to financial gain.
3. Failure to set goals
While many entrepreneurs become starry-eyed, envisioning their business as the next Facebook, they should keep in mind that in the beginning, the small milestones matter most. Consider first profits, reinvestment ratios, and new hires when setting initial goals. With good estimates of costs and sound market research, you can set realistic goals that better ensure business success.
4. Underestimation of the power of marketing
Countless entrepreneurs have a great product or service, but fail to budget for marketing — an often fatal flaw. A product or service rarely speaks for itself; you need marketing to get the word out. After all, people can’t buy what they don’t know about. But how much budget should you allocate to marketing? Start by choosing which budget method to apply when making that decision. Common methods include percentage of sale, percentage of total budget or a combination of both.
5. The jack of all trades
CEO and founder of Comestic Promotions Joann Marks notes, “The biggest mistake an entrepreneur can make (and most do) is to believe that, just because they are an expert at what they do, they have what it takes to run their own business.” While entrepreneurs may be good at product development, sales, business planning, branding or marketing, it’s likely he or she doesn’t excel in all these areas. Going it alone or being overconfident could prove your downfall. Accept that you may need help or advice in one or more of these areas, and you’ll save time and money.
Life never goes as planned. The same is true in business. Sticking to the original plan in spite of inevitable changes spells trouble for an entrepreneur. You have to expect change and adapt. At every key turn of your business launch, plan for the worst-case scenario. You may not need that plan, but you’ll be glad you have it if you do. Don’t be afraid of new ideas, too — after all, once upon a time Nokia made rubber boots. From tweaking a product to altering a business model, prepare to be flexible to survive. That being said…
7. Excessive flexibility
Entrepreneurs must trust their instincts. Listening to everyone’s advice too much, especially negative advice, can create a startup identity crisis from which the business can’t recover. Be clear about the purpose from the start, have goals, and stick to the way you want to run your business. Don’t allow the business be pulled in too many directions — a house divided cannot stand.
8. Poor hiring
Hiring at the wrong time or hiring the wrong person can be among the costliest mistakes a startup can make. Hiring too early essentially throws money out the window. Hiring an unqualified person or someone who is a bad fit for the company and its vision can ruin a startup. Be clear on why you need to hire a person, the type of work you expect him or her to do, and interview thoroughly to ensure the person is a good fit skills-wise and with your company culture and vision.
9. Small margins
Setting a low price for your product or service just to attract customers may seem like a good idea at first, but can set up a business for failure in the long run. Be clear on the profit margins you need to cover costs and run your company, and consider this when establishing prices. Taking this approach makes growth easier and avoids disgruntled customers if you set prices too low at first, only to raise them a short while later to stay in the black.
10. Fear of failure
Audrey Darrow, president of Earth Source Organics states, “The biggest mistake you can make is to be afraid of failure!” Preparing for setbacks does not equate to expecting failure — in fact, taking this approach makes failure a learning experience. Don’t let fears paralyze you and prevent you from starting and running your business! Prepare for mistakes and move forward confidently.
Still ready to launch your business? Great. Although starting a new business may seem daunting, you can do it if you prepare adequately. Make sure you pay attention to and avoid these common mistakes to give it the best chance for success. In my opinion, with research, time, and a great product or service, any business can succeed.