Common Mistakes Small Businesses Make And How To Avoid Them
Unfortunately, only a few start-up businesses make it beyond their 3rd year. Failure is usually down to several identifiable mistakes, which, if small business owners are aware of, can increase their chances of survival.
Here are the top 10 common mistakes that small businesses tend to make.
Lack of Market Research
When a budding entrepreneur comes up with an idea for a new business, he assumes that because he would buy such a product or service, everyone else will. This may be the case for day-to-day necessities, but this is usually different for other items. It’s crucial that when you start up, you carefully research the market to check that the:
• There is demand at a level that would lead to a sustainable business
• People are prepared to pay the price required for you to make a decent profit Undertaking market research may appear time-consuming, but the effort will pay off.
Poor Record Keeping
Some business people are not born administrators; they feel more comfortable getting out there and ‘doing business. Paperwork is too easy to ignore but can never be put off indefinitely. Sales, purchases, and other expenditures must be carefully documented so you know whether you are making a profit. Invoices must be issued on time and chased up promptly if there is a delay in payment. It’s all very well having the sales, but poor record-keeping can hold you back. Having your paperwork in order will also save you time for your accountant to do your year-end books!
When starting, it’s easy to decide what capital is required for fixtures, fittings, machinery, and stock. Many new business owners forget the cash needed to fund day-to-day requirements, i.e., cash to pay expenses before your customers pay you. This is known as your working capital requirement. Small businesses can fail because they have insufficient cash to meet these immediate expenses. If you wish to survive, set aside enough cash to meet all your needs for the first few months.
Ineffective Marketing Or None At All
You cannot afford to treat the cost of marketing as an unnecessary expense. A business with no marketing is like waving in the dark – you know you are doing it, but no one else does! There are many ways to promote your business on a small budget; it’s just a case of being inventive and creative. Whatever you do, don’t assume that people will quickly know you are in business – they won’t unless you tell them.
Ignoring Changes In The Market Place
As a small business owner, it’s straightforward to get immersed in your business and not see what is happening around you in the marketplace. Always keep your eyes and ears open to what the competition is doing and what your customers want. Don’t get left behind.
Attitude is everything in business. Don’t forget that the real boss in your business is the customer. Running a business may make you feel important, but don’t let this develop into an ‘I am better than you attitude. Do this, and you will quickly chase your customers away.
Spending On The Wrong Things
Being in business can be exciting, especially as the cash starts to roll in! However, don’t be tempted to spend it on a new car, a house, or a good time. To own a successful business, you must keep some cash back to fund future growth. A business cannot grow without cash, so commit to spending business money on the business.
Dependent On A Small Number Of Customers
Doesn’t fall into the trap of setting up a business just because one person says they will buy from you every week or month. Setting up and running a business, which is dependent on one customer, is not a recipe for success. What happens if, one month after you have spent all your cash to set up your business, that customer says he has changed his mind and has decided to buy elsewhere? Unless you can find other customers very quickly, you are faced with closure. Before embarking on a new venture, ensure you have a sufficient number of customers so that if a few go elsewhere, you can continue trading.
Growing Too Quickly
Surprisingly, growing too quickly can be a problem. It would be best if you were disciplined enough to handle only the work you can. If you are tempted to accept too much, you could end up disappointing the new client and your existing ones. Also, don’t underestimate the impact rapid growth can have on your administrative burden. As I mentioned earlier, getting behind on the paperwork can equally damage your business.
Trying To Do Everything
Finally, the problem most small business owners have is that everything falls on their plate. Inevitably this is how it’s likely to be in the beginning, when the limited budget means that staff is a luxury, but as the business grows, be aware that you cannot continue to do all tasks. There will come a point when you become inefficient and do not have enough time to complete everything in sufficient detail. Taking on an extra pair of hands will increase your costs, but you will be surprised at how much time will be saved, allowing you to do what you do best – getting the business in.
Look at each mistake and ensure you don’t fall into these traps.
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