9 Mistakes Many New Business Owners Make
Many small business startups fail within their first one to two years, and you certainly do not want to face this same outcome with your own business endeavor. As a new business owner yourself, you may be wondering what others did wrong that let to their demise. In some cases, a bad product or unnecessary service was to blame. However, in many other cases, business owners with a fabulous product or service lacked in other critical areas, and this led to the ultimate failure of the company. By learning about their mistakes, you can avoid making them yourself. These are some of the top reasons why small businesses commonly fail.
1. Failing to Have a Business Plan
Writing out a formal business plan is one of the best things that you can do for your new business, and it should be done before you even launch the business. However, some business owners think that they will wing it, or they believe that they have a formulated plan in their head. When you write down your plan, however, you are forced to think through all aspects of running your business and to research costs, vendors, alternatives and more. The business plan can guide your decision-making processes for months to come. This extra step makes a world of difference when running your small business.
2. Not Understanding the Target Audience
You may have a wonderful product or service, but you need to know specifically who will benefit from it and how they will use it. Understanding your target audience is critical if you want to properly market your products and services. It will define your marketing message as well as determine which marketing avenues are best-suited for reaching the target audience. Take time to research your target audience, and consider a small-scale launch to learn more before you move onto a bigger playing field.
3. Failing to Have a Marketing Plan
Developing a thoughtful marketing plan is critical as well. This is because a marketing plan is necessary to formulate your message in a cohesive, uniform way as well as to deliver it effectively. It is also necessary to determine how much money you need to spend to reach your audience effectively. You may need to revise your marketing plan as you begin marketing to your target audience and after you have reviewed some analytics about your previous efforts. As with the development on a business plan, creating a formal marketing plan requires you to fully research all aspects of your marketing efforts.
4. Not Focusing on Customer Service
You may be well aware that customer service is critical for small businesses. It helps to retain your clients and can result in great word of mouth advertising spreading about your business. However, many small business owners unfortunately are so focused on delivering a great product or service that they fail to go the extra mile to fully satisfy their clients. In some cases, the ability to spend a little more time demonstrating, answering questions or following up with a customer after the purchase can make all the difference in locking in a long-term client who sends you a regular stream of new leads for years to come.
5. Spending Too Much Money
As a new business owner, it is important that you stick to a tight budget. You have a limited amount of capital, and you likely will not be operating in the black for many months to come. You must have a detailed and full budget outlined, and you should research all purchases you make to ensure you do not overspend in any area. If you feel that you have failed to budget and estimate expenses properly, you may need to seek financing to compensate for your lack of necessary funds.
6. Clinging to Bad Clients
Small business owners must work hard to retain clients, but there are instances when some clients should be let go. Bad clients can take up too much of your time and may never be happy regardless of how hard you try. This means that you may spend far more time working on these clients without receiving any additional benefit from it. It is best to cut some clients loose and to spend more time nurturing relationships with better clients.
7. Pricing Products and Services Too Low
Some small business owners develop an initial strategy of trying to entice new customers to do business with them by low-balling their products and services. This strategy may work for a short period of time to get new clients, but eventually, you will need to raise your prices in order to pay for your overhead fully. When this happens, you may lose your established clients, or they may become dissatisfied. Furthermore, you cannot operate with rock-bottom prices in perpetuity, so this business model is generally failed from the start.
8. Trying to Do Everything on Their Own
Another common reason why some small business owners fail with their effort to launch a startup is because they attempt to do everything on their own. In most cases, a small business owner is an expert in his or her field, but he or she may not have financial skills, a technological background and more. It may be necessary to outsource some projects to the experts so that you enjoy high-quality results without unnecessarily wasting your time working on things that you have little knowledge in.
9. Failing to Buy Insurance
All businesses face specific types of risks that ultimately could result in financial loss. Insurance is available and often even necessary for small businesses. Everything from health and property insurance to liability coverage, auto insurance and more can help you to avoid financial loss if an unfortunate event occurs.
Small business owners face many pitfalls and perils in their initial months, and your ability to successfully navigate through these pitfalls will result in the best outcome for your business. If you are preparing to launch a business, carefully think through each of these points to determine the proper steps you can take to avoid making them yourself.