More than 40% of small business owners close their business prematurely within the first year, and 80% within five years. These statistics clearly show that even a small, seemingly insignificant mistake could lead to the same fate for you.
Mistakes in business are unavoidable; sooner or later, everyone makes them. As the statistics show, mistakes made right at the start can quickly bring a business to an end. Yet these are precisely the mistakes that can be avoided, since thousands of new entrepreneurs have made them before you. Simply learn from the mistakes of others and you will avoid most problems before they arise.
The most common mistakes when starting a business.
Lack of interest in the business itself
Many entrepreneurs are interested not in what their business does but only in profit – and this is one of the most common causes of failure. You should expect your business to consume all your time and energy, so it is important to start a business in a field you genuinely enjoy and are willing to put all your effort into.
An untested business idea
Entrepreneurs very often start out without checking whether there is market demand for the product they want to offer. Before launching your business, therefore, carry out market research and expose your business plan to criticism from those around you. Finally, answer a few basic questions. Are you sure you can make a breakthrough with your product? Is there a target group of people who will be interested in your products and services? If you nevertheless decide to rely solely on your intuition and judgement for your business idea, you should avoid all the other mistakes as far as possible.
[widgets_on_pages id=”SK-CTA”]
Choosing the wrong location
One of the fundamental mistakes new entrepreneurs make is choosing the wrong location for their business. Once you start in the wrong place, it is only a matter of time before something goes wrong. Never underestimate the importance of where you operate. Owning a luxury lingerie shop on an industrial estate, or running a nightclub in a village of 200 people, calls for a great deal of optimism – or an even bigger marketing budget.
No business plan
Starting a business without a business plan is like building a house without architectural plans: you never know how it will turn out. Many new entrepreneurs, as well as those starting again, launch their business without a proper business plan. Some are so taken with their idea that they believe their determination and positive attitude will see them through everything else. Others think it is enough to keep all the important information in their heads. It is precisely these entrepreneurs who usually have no initial market research, no systematic advertising campaign and no analysis of expected costs and revenues. As a result, their business is full of surprises and unexpected situations from the very start.
And yet it takes so little to avoid this mistake! Find a few basic business plans in specialist literature and online, study them carefully and use them as the basis for your own plan. The business plan of a larger organisation may run to more than 50 pages; one page may be enough for you. However, it should certainly include the following information:
A description of your company, its mission and objectives Competitiveness – your advantages over the competition Your company’s business strategy Your company’s market position and a definition of the customers willing to buy your products Marketing – how the product will be presented, advertising and its estimated costs Objectives for the next 6 months Objectives for the first year of business Objectives for 5 and 10 years
For small businesses, summarising each point in one or two sentences is often sufficient when writing a business plan. What matters is that the business plan is realistic and sets a clear direction for the core area of your business. It should enable you to describe quickly and concisely what you do and why it is better for your customers than competing solutions.
Underestimating the financial budget
If you do not want to fail and fall victim to unrealistic expectations, you must not forget about your financial budget. It is important to calculate in advance how many customers you will need to cover your costs and enable your company to thrive and make a profit. Only then can you avoid further missteps.
Poor time estimates
The fact that a working day has 8 hours does not mean you can devote all of them to the core, profit-making activity of your business. Every business also needs time for administration, marketing, training and other operational and support activities. Only if you plan time for these activities properly can you realistically determine how much time you have left for your customers.
Putting off important decisions
Putting off important decisions simply because they are important can prove to be a big mistake. However much you dread them, they should be made as soon as possible. The early days of a business move very fast, and if you cannot keep up, you may drop out of the game prematurely. Successful people often say there are no bad decisions, only decisions that are not followed through. You must not be afraid of your own decisions. Whatever they turn out to be, you will always gain valuable experience that helps you improve.
Ignoring market inertia
New entrepreneurs often imagine that luring customers away from the competition will be easy. However, the advantages of your service or product alone are not always enough. You need to research the market well in advance and understand how it works, because customers may face various obstacles to leaving a competitor, such as:
contractual penalties for terminating a contract the attractiveness of a competitor’s additional services attractive discounts for long-standing customers a lack of interest in the price advantage of your offer a lack of interest in the quality advantage of your product the cost of managing internal processes when switching to a new supplier personal relationships with the current supplier
Misspent marketing budgets
In today’s saturated and highly competitive market, you need to invest as much as possible in raising your profile. Doing your own SEO for your company website is certainly not enough. If you want to break through, you have to invest in paid forms of marketing – and invest heavily, because advertising is essential to your company’s survival. Above all, do not neglect the quality of your marketing materials, as it is vital to come across as highly professional.
On the other hand, however good a product you manage to create, you must accept that it will never be good enough for, or needed by, everyone. You should therefore choose a specific segment of the market to focus on and tailor your marketing activities to it. Money spent on “general” marketing will never pay off as effectively as marketing tailored to a specific target group.
Insufficient investment in public relations (PR)
Another serious mistake new entrepreneurs make is underestimating the impact of PR activities. You certainly should not expect customers to come to you of their own accord just because you have a good product. Especially at the start, you need to pay particular attention to communicating with the public and use every available means to inform potential customers of your advantages over the competition. Attend conferences, get involved on social media and organise events for the public.
Above all, remember to train your staff so that each of them is a good ambassador for your company.
Not paying enough attention to building long-term customer relationships.
In their efforts to win as many new customers as possible, new entrepreneurs often forget to pay proper attention to the clients they have already won. Ask yourself whether you maintain strong enough ties with your existing customers. Remember that only a satisfied customer will be willing to try your new products and services.
Unnecessary purchases
One of the first things many new small business owners do is spend heavily on fitting out an office. They spend whole days choosing colour-coordinated files, stationery, modern furniture and top-of-the-range electronics. Perhaps they want to give themselves a sense of security and stability, or to be ready for the arrival of that dream big client who might otherwise find them in surroundings that are too modest. They focus on building an image before they have even entered the market. Such purchases, however, can eat up a great deal of precious time and even more precious money.
So before you buy anything, draw up a detailed list of what you absolutely need and compare it with an inventory of what you already have – and follow this approach for every purchase. When it comes to software, opt for free office programs, which are often in no way inferior to paid ones and will serve your needs just as well. This is the only way to avoid unnecessary purchases, and you will be able to invest the money saved where it will bring your company profit and a good reputation – in direct communication with customers and building long-term relationships. There is nothing worse than sitting in a smart but debt-laden office with no money to travel to see a customer.
Starting a business with two partners on a 50/50 split
A very common reason for a business closing prematurely against the owners’ wishes is a joint venture between two people with a 50/50 split. It usually starts with a reasonably good business idea and the belief that a strong friendship or family ties will lead to business success. Whether you like it or not, however, business and friendship are two different things, and the first serious disagreement could spell the end of your business dream. So if there are two of you, it is better to bring in a third partner – it will make voting at the general meeting much easier.
Failing to allocate responsibilities.
Whether there are two or five of you in the business, remember to divide up the responsibilities right at the start. Otherwise you risk descending into chaos, which will only breed more chaos. Each partner should specialise in a particular area, and the tasks assigned should reflect their personal preferences and professional strengths.
Lack of patience.
Do not give up at the first setbacks, and do not abandon your dreams just because results are slow to come. As the saying goes, success is 10% luck, 20% skill, 15% concentrated willpower, 5% pleasure and 50% hard work.