Starting a new business and watching it grow is exciting. You are about to launch (or have launched), what could be the biggest game-changer in your life, and the lives of those you love. However, you should be aware of the mistakes to avoid when starting a small business. Unfortunately, many budding business owners make these common mistakes, and it costs them dearly down the road.
#1 Not writing a business plan
No business should be born without a business plan. Yet, some business owners don’t write one. This is a recipe for failure! Writing a business plan helps you deconstruct and validate your business idea. It also helps you better understand your unique value proposition, your audience, your market, and the competitive landscape. All of which are crucial to starting and running a successful business.
# 2 Not having your legal ducks in a row
Depending on your business, you might need to obtain licenses, permits, and other legal documents to operate. Your business might also have to comply with specific regulations. Failure to meet these legal requirements could lead to hefty fines or even jail terms. To ensure you have all your legal duck in a row, contact the relevant state and federal agencies to see what’s required.
# 3 Only planning for success
Running a business is a roller coaster ride; there are many ups and downs and twists and turns. However, if you only plan for the ups, you won’t be prepared for when things go wrong. One way to avoid this is by conducting a SWOT analysis. This will help you identify potential issues and roadblocks and have a plan in place in case they arise.
# 4 Underestimating pricing
Every business has an ideal price point for their products and services. And baked into price points is the cost of operating your business and the profit you want to make. However, some business owners underestimate their ideal price point and then find themselves struggling to make ends meet and turn a profit. Getting your pricing right is crucial, so make sure you have performed due diligence in this area of your business.
# 5 Not having accurate financial projections
This mistake ties in with the last point. Before you launch a business, your financials have to be accurate. You should fully understand your operating costs, pricing structure, and the number of monthly sales you need to run your business and turn a profit. This is really not a mistake you can afford to make. Doing so could lead to bankruptcy.
# 6 Buying too much inventory too soon
Buying in bulk helps you negotiate better prices, which means higher profit margins on units. However, investing in bulk inventory can also cause cash-flow issues if you don’t sell enough, fast enough. When starting a business, it’s best to buy what you need, so you don’t run out. But, wait until you have a better understanding of product turn-over before you spend capital on bulk inventory buys.
# 7 Not owning the rights to intellectual property
Intellectual property refers to creations of the mind, such as names, logos, images, artistic works, and ideas. These creations usually fall under four categories – trademarks, copyrights, patents, and trade secrets. Determine what business assets and materials require intellectual property protection and file with the relevant authorities.
# 8 Waiting too long to hire employees
When you start a business, you wear all the hats. You’re a marketer, accountant, salesperson, customer support agent, etc. However, as your business grows, you need to focus your energy and time on growing your business, not working in it. This means hiring employees, which is a big step for business owners. But don’t wait too long to make the jump. Not hiring when it’s time, will slow the growth of your business, it can also cause you to burn out.
#9 Hiring the wrong people
While it’s important to hire employees to help you carry the workload and grow your business, it’s essential that when you are ready to hire, you hire the right people. Don’t rush the process or make hasty decisions. Make sure you know exactly what’s required for each position, and the type of person best suited to each role. This way, you will hire employees that bring something to the table and have the necessary skills, attitude, and commitment to push your business forward.
Over to you
As we said at the top of the post, starting a new business and watching it grow is exciting. But don’t get lost in the haze of excitement and make mistakes that can have a severe negative impact. You now know some of the common mistakes to avoid when starting a small business, so ensure you don’t make them.