10 Mistakes People Make When Starting a Business
Passion and drive will get you far when starting a business but beware of these 10 mistakes.
So you’ve decided to start your own business? Well, you have chosen a great time. Entrepreneurship is growing at an unprecedented rate in America and the small business community is prosperous and healthy. We applaud you for making the bold decision to start your own firm and wish you the best of luck in the exciting, fulfilling and occasionally bumpy road that lies ahead of you. While the startup climate in America is vigorous, statistics show that 90% of startups fail and half of all small businesses do not survive more than 5 years. It takes real entrepreneurial spirit and drive to succeed at small business ownership, and with passion, focus and the mistakes of entrepreneur’s past on your side, you just might have what it takes. With proper planning and knowledge, you can avoid major mistakes but don’t underestimate these 10 common errors that entrepreneurs make when starting a business.
Hiring the Wrong People: Employees are one of the most important components in the formula for a successful business. Take your time and do your research; find enthusiastic employees who want to be there and care about their contribution to the company. You can teach skill, you cannot teach character.
Not Investing in the Future: Marketing does not generate leads immediately; it’s a perpetual process that requires constant attention before it yields results. Set aside money that is solely for marketing and for a new business, this fund should focus on developing a website, social media, signage, press releases, and probably an AdWords campaign to get your name out. We live in a digital age and without proper internet marketing, you will struggle to remain competitive. Do not skimp on a marketing program – you will thank yourself later.
Rushing Due Diligence: Buying or starting a business is a life commitment so take your time during due diligence. Due diligence is your time to review everything so that you know exactly what you’re getting into. During this stage, create a financial plan and try to account for as many expenses as possible to prevent under-capitalization. Also take the time to research your market to ensure there is a need for your business, analyze tax implications, and obtain legal counsel. Here’s our Due Diligence Checklist to give you an idea of what to look for.
Relying on Employees: Empower your employees but do not rely so heavily on them that the business cannot function without any one of them. Things happen – employees call in sick, people quit unexpectedly and everyone deserves a vacation; save yourself a headache and cross train your employees. Training employees in varying departments ensures that the business will never suffer due to an absence and that you will never be held hostage as the owner.
Under Analyzing Financials: Know your numbers, inside and out. Research pricing prior to starting the business so that you know where you need to be to stay competitive and so you can plan for expenses. Analyze your price points, margins, expected cash flow and revenues, payroll, etc. If numbers aren’t your strength, find someone who can help you – this tip is critical.
Neglecting Yourself: Running a business is incredibly fulfilling but it does have some challenges. While it’s not always possible to separate your work life from your personal life, try to set aside some time every day to just focus on decompressing and reenergizing. The #1 reason business owners sell their company is burnout; take care of yourself so that you can make it for the long haul.
Going in Alone: Identifying and utilizing a mentor can really help during the growing pains of starting a business. We see so many business owners try to do everything themselves and test the business through trial and error – don’t do this! It may not feel like it but there are thousands of people who have been in your shoes and are willing to help you become successful. If you are starting a franchise, reach out to other franchisees to see what works and what doesn’t to give yourself that extra edge.
Lacking Market Knowledge: Know your competition! Researching your competition should be done during the beginning stages of starting your business. Analyze their product and service offerings, pricing, market share and advertising efforts to see where you need to be to compete. Another huge asset to have in your arsenal: customer reviews. Check out Yelp or Angie’s List to see what their customers are saying about them; this way you’ll know the shortcomings within your industry and begin improving them from day one.
Following your Passion: We’ve all heard the saying ‘do what you love and you will never work a day in your life’ but realistically, this is untrue. Anything will begin to feel like work when you do it day in and day out, even if it started as a hobby. Throw employees, financial responsibility and liabilities into the mix and your hobby may start to feel like more of a chore. Here’s some real advice for starting your business – don’t do what you love, do what you’re good at.
Unrefined Business Plan: We can’t emphasize this enough – have a plan. Have a plan and get it on paper then let your advisors tear it apart. Find the holes in your business before you have invested time, sweat and money that you can’t get back. Don’t just write a plan for the first year; have a vision for the next 5 – 10 years so that you always know where your business is going and what you are striving for.