Avoid these mistakes that can sink your small business – Part I
So, you’ve decided to start a business. You have the proper business structure and some funding to keep you afloat. You’re all set, right? Well, not exactly. There are common mistakes small businesses make every year, and the consequences can be harsh. One study estimated that a staggering 18.4% of businesses fail in the first year, and that number balloons to 65.5% after 10 years. The good news is this fate is avoidable if you know the problems and how to avoid them. Let’s do that with three of them this week and the rest next week in Part II. Here’s the first one.
Not defining their ideal customer
This mistake is common but very dangerous. It may not catch a business in the first year or two, but it can be devastating when it does. Not recognizing the ideal customer can cause you to focus on too many services or products. And each additional one comes with additional costs. It can also cause you to overspend on marketing. Spending a fortune advertising to people without desire for your product wastes money. Fortunately, this can be fixed with inexpensive customer research. So, take time to learn and grow this skill set. It can be a lifesaver.
Not having a business plan
You’ve probably heard the phrase, “if you fail to plan, you plan to fail.” The only reason that is a cliché is that it’s true! A good business plan will force you to do the market research mentioned earlier. It will also make you do a Strengths, Weakness, Opportunities, and Threats (SWOT) analysis. A SWOT analysis helps you analyze competition, find holes in your plan, and take advantage of things others might not see. It can also be a tool to get funding from lenders and attract investors.
The U.S. Small Business Administration has some excellent free resources to help you write a business plan. They include a traditional business plan and a lean startup business plan. Whichever one you choose, it will help and is certainly better than winging it.
Not adapting the plan
Having a plan is one thing, but it must be used well. Business plans were made to be changed and adapted. The business landscape is constantly changing, and your plan should change when needed. You should refer back to it often and look at your business critically. Has competition changed? Are there new opportunities? Do you need to change policies and procedures? Keeping a plan stagnant is nearly as bad as not having one. So, think dynamically!
The bottom line
Most common small business mistakes are made by omission. It isn’t what you do; it’s what you don’t do that creates problems. So, hone in on your ideal customer. Then, do the necessary research to ensure all your efforts, from production to marketing, are focused as tightly as possible.