Starting and sustaining a company is challenging no matter who you are or what your business is. There’s no question that you’re going to make a few mistakes here and there as you launch your company— and there’s nothing wrong with that, especially if you’re actively learning from your errors.
However, with all the open-access you have to learn from the mistakes and experiences of other companies and entrepreneurs, one of the most worthwhile steps you can take for your business is to familiarize yourself with the most common small business mistakes, and how to avoid them.
In this article, we’re going to cover the five most frequent mistakes small business owners make during their first year of operations— giving you the knowledge and direction you need to prevent encountering the same slip-ups.
Table of Contents
Mistake #1: Neglecting to create a business plan
Business planning is the first and most important step towards starting any business. It serves as a roadmap, that carefully outlines how your company will run, make money, and maintain future growth. A business plan is also going to be necessary if you’re planning to partner up with investors as they’re going to want to see that you have a comprehensive view of your organization and the market in which you work.
By and large, the primary reason why startups fail is due to excessively ambitious plans that just come rolling out of the gate swinging too hard, and far too fast. It doesn’t matter how brilliant your envisioned concept may be; it’s destined for doom from the outset if you’re not intentional about every single detail pertaining to execution.
Mistake #2: Skipping the market research
Your business plan should also include critical research that precisely assesses the demand for your service or product. Be sure to also evaluate any competition that you would expect to encounter. Who are your ideal clients? Identify your target demographic as narrowly as possible to determine who you and your service or product work for.
Who are your closest competitors and how are you going to work, to provide a service or product that outshines the rest? Well-done market research should give you enough to work with to formulate solid answers to these essential questions.
Mistake #3: Not exploring available financing options
Did you know that conventional bank loans aren’t the only source of funding? If you think you’re restricted to traditional business loans, think again. Equipment financing, invoice financing, merchant cash advances, or even the use of credit cards may be viable solutions that can help you obtain the capital you need to get your vision off the ground. Small personal loans might also be a quick option.
Pro-tip: Don’t wait until that absolutely last minute to figure out where you’ll source your funding. Start weighing your options and researching the funding available to your business ahead of time.
Mistake #4: Waiting too long to hire
Waiting too long to build a team of employees is one of the most common small business mistakes that can have a serious effect on business growth. If you don’t hire staff when the moment you may think you need more hands on deck, odds are fairly likely that you’ll end up swamped with too much work to do and handle on your own or with a tiny team.
Conversely, rushing through the process once you’ve realized you need more help can lead to a team of jumbled workers. A team unfit to do the job will set you back further than you may imagine— you don’t want to be stuck with someone trying to play catch up bookkeeping or someone operating machinery without proper training. Be diligent in tracking your growth and hiring when necessary.
Mistake #5: Spending too much
Profit margins are everything, and you need yours to be impressively wide when testing the early models of your business plan. This is hardly a news flash, but it’s important to keep in mind that things rarely go exactly as expected, so it’s a smart idea to give yourself plenty of wiggle room as you wait for revenue to start trickling in.
Your sales forecast might be a little off during the early stages— don’t panic. These factors may be out of your control, but you have a far greater say in your expenditure levels. Closely monitor how much you’re spending to avoid the possibility of dealing with future bankruptcy. This can also help ensure that your lenders regularly collect their monthly payments in full.
Congratulations! You’re a small business owner. With these common mistakes in min, you’ll be able to stay organized, productive, and most importantly, profitable for years to come.