Common Mistakes Small Businesses Make and How to Avoid Them

 Common Mistakes Small Businesses Make and How to Avoid Them

Summary:

• Unfortunately, very few newly founded companies make it past their 3rd year. Failure is usually due to several clearly identifiable mistakes that, if small business owners are aware of them, can increase their chances of survival.

Article text:

• Unfortunately, very few startup businesses survive past the third year. Failure is usually due to several clearly identifiable mistakes that, if small business owners are aware of them, can increase their chances of survival.

Here are the 10 most common mistakes small businesses make.

Lack of market research

• When a budding entrepreneur has an idea for a new business, they assume that everyone else would buy such a product or service because they would do it themselves. This may be the case for everyday goods, but it is not usually the case for other products.

You must research the market carefully when setting up your business to check this:

- the demand is such that it will lead to a sustainable business

- people are willing to pay the price you need to make a reasonable profit

Conducting market research may seem time-consuming, but the effort will be worth it.

Poor record keeping

• Some business people are not born administrators; they feel more comfortable going out and "doing the business." Paperwork is too easy to ignore, but can not be put off indefinitely.

• Sales, purchases and other expenses must be carefully documented so that you know whether you are making a profit or not. Invoices must be issued on time and followed up immediately in the event of late payment. It’s all well and good to make sales, but poor bookkeeping can slow you down.

• Keeping your paperwork in order will also save you time when your accountant does your annual accounts!

Insufficient capital

• When starting a business, it’s easy to decide what capital is needed for the equipment, machinery and stock. What many new entrepreneurs forget about is the cash needed to fund day-to-day needs, i.e. cash to pay expenses before your customers pay you. This is known as working capital requirements.

• Small businesses can fail because they do not have enough cash to cover these immediate expenses at the start. If you want to survive, make sure you set aside enough cash to cover all your needs in the first few months.

• Ineffective marketing or no marketing at all

You can not afford to think of marketing costs as an unnecessary expense. A business without 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; you just have to be inventive and creative. Whatever you do, don’t assume that people will quickly know you have a business – they won’t if you do not tell them.

Adapt to changes in the market

As a small business owner, it’s very easy to get wrapped up in your business and not see what's going on 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 stay behind.

The attitude of the owner

Attitude is the be-all and end-all in business. Remember that the real boss in your business is the customer. When you run a business, you may feel important, but don’t let it develop into an "I am better than you" attitude. If you do, you will quickly alienate your customers.

Spending on the wrong things

Running a business can be exciting, especially when the money starts flowing in! However, don’t be tempted to spend the money on a new car, a house or just a good time. If you want to run a successful business, you need to keep some money back to fund future growth. A business can not grow without cash, so commit to spending the money on the business.

Depending on a small number of customers

Don’t fall into the trap of starting a business just because one person says they will buy from you every week or month. Starting and running a business that is dependent on a single customer is not a recipe for success. What happens if, a month after you have spent all your money building your business, that customer says they have changed their mind and decided to buy elsewhere? If you are not able to find other customers very quickly, you will be out of business.

Before you start a new business, you should make sure that you have a sufficient number of customers so that you can continue your business even if some of them leave.

Growing too fast

Surprisingly, growing too quickly can be a problem. You need to be disciplined enough to only take on orders that you can handle. If you are tempted to take on too much, you could end up disappointing not only the new customer, but also your existing customers.

Also, don’t underestimate the impact that rapid growth can have on your administrative overhead. As I mentioned earlier, falling behind on paperwork can be just as detrimental to your business.

Try to do everything

The problem that most small business owners have is that everything falls on their head. This is inevitable in the beginning when limited budget means that staff is a luxury, but as the business grows, you need to realise that you will not be able to do everything. There will come a point when you become inefficient and do not have enough time to do everything in sufficient detail. Hiring an extra couple will increase your costs, but you will be surprised how much time it will save you and allow you to focus on what you do best – moving the business forward.

Take a look at each of these mistakes and make sure you don’t fall into these traps.