Avoiding common small business mistakes, Part II

Last week, we started our two-part series on common mistakes that could sink your small business. This week, we’ll finish up the list and give you tips on how to avoid those mistakes so your business can thrive.

If you missed last week’s blog post, you can find it here.  Take a moment to read it before you jump into this one.

Back already? Great! Let’s get going with the next common mistake.

Not knowing the best way to compete

Ask most beginning entrepreneurs what they sell, and you’ll hear about their product or service. But that’s only part of the picture. You must also figure out how your product or service competes in the marketplace.

In his book, The Pumpkin Plan, Mike Michalowicz said all successful businesses compete on one of three things: quality, convenience, or low prices. He points to McDonald’s as an example. They may claim quality, but you can get a better burger elsewhere. People may believe they compete on low prices, but you can make a burger and fries cheaper at home. What they really sell is convenience. When you are in a hurry for a meal, you can’t beat the speed of their drive-thru.

Work with a mentor or a business coach to determine which area you compete in best. It will help you solidify your business plan.

Not implementing a good bookkeeping process

Most people don’t go into business to crunch numbers. And at the beginning of a business, looking at the accounts can be time-consuming and a little nerve-racking.  A good bookkeeping system can help tremendously.

The best remedy is to hire a CPA because they can help with the books and provide advice that helps your business grow. In addition, they can usually point out opportunities and threats you didn’t know existed. If that is not in the cards yet, then consider learning bookkeeping as part of the entrepreneurial journey. So, roll up your sleeves and learn all you can. Here’s an excellent article to help you get started.

Underestimating capital needs

This is an easy mistake to make because there are so many variables. But it can have long-term effects on revenue and productivity. The best remedy to this problem is research. If you have a mentor, get their advice on your business startup costs. Often, their experience will help you realize overlooked areas.

Also, read all you can on the startup costs for your business. Like a mentor, good articles from experienced entrepreneurs will reveal holes in your planning that you can fix before they become problems.

After you have a grasp of your costs, secure adequate financing through savings, a line of credit, an SBA microloan, or a grant. Consider securing about 10% more than your estimated costs to help with unforeseen issues.

Not knowing your personal finances

You need to know your living expenses, especially if your new business is your sole source of income. Not having a personal budget will create hardships for you, your family, and your startup.

Make a budget with a worst-case scenario in case your startup encounters trouble at the beginning. That way, you can concentrate on your business without being distracted by how you will meet your personal obligations.

The Bottom Line

Starting a new business is exciting, but it can be challenging.

By knowing what to compete on, keeping good books, knowing your startup costs, and preparing your personal finances, you can get your business off to the start it needs to be successful.