10 Mistakes New Business Owners Make
Running a successful business is certainly no walk in the park. With so many
opportunities to misstep and fail, it’s a wonder, sometimes, that any entrepreneurs succeed in their endeavors. Those who do navigate the obstacles of the small business world do so by avoiding common new business errors. There’s a well written article by Nick Reese over at TheYEC.org that you can read for more information about avoiding common new business owner mistakes. Reese’s list of 10 common mistakes that business owners make covers everything from failing to use an accepted and legally sound business contract to handling the tax changes that a business owner will experience.
I’ve come up with another list of ten mistakes that new business owners make. Avoiding these mistakes will help you sidestep some of the most common pitfalls that derail even the best-planned efforts of brilliant entrepreneurs. When you are just starting a small business, even the smallest mistakes can cause massive business tragedies.
Focusing on the Profits Rather than the Customer
One of the easiest mistakes to make when you start a small business from the ground up is focusing too much on your profit margins rather than the needs and wishes of your customer population. In the first few months of business operation, generating profits is incredibly important. Without these profits, you’ll be unable to continue for any prolonged period of time in your business efforts. With that said, it is still important to balance the pursuit of profits with service to customers. Customers are the lifeblood of a small business. Customers provide the profits. If customers are satisfied and pleased with their experience, profit margins will take care of themselves.
Single-Minded Business Behavior
There’s an old adage that recommends one to never “put all his eggs in one basket.” The adage is based on a common experience for small chicken farmers. Collecting all of the day’s eggs in a single basket puts every single egg at risk in the event that the basket is dropped or damaged. If you place eggs in multiple baskets, however, a portion of your crop is protected. The same holds true for business. Single-minded business behavior involves focusing all of your efforts on a single endeavor. This may be a product, service, online advertising strategy, customer population, or business milestone. Instead of focusing your efforts singly, you might want to consider broadening your business’s perspective.
Skipping the Number Crunching
Number crunching is one of the least enjoyable parts of starting a business. Nobody goes into business because they dream of sitting in front of an Excel document entering data and making calculations. These financial calculations, however, lay the foundation and groundwork for your business. Unless you know the relationship between expenses and generated profits, you’ll have no way of effectively measuring the success of your business venture.
Moving Forward without a Plan of Action
Another common mistake that can threaten the success of your business is forward movement without detailed planning. It can be very easy for entrepreneurs to get carried away by forward momentum. They begin making rash business decisions, biting off more than they can chew, and allowing their business to run away from them. Your business should always move forward, but it’s important to move forward with meticulous and intention progress.
Putting Legal Problems on the Back Burner
Legal issues can quickly derail a business’s progress and increasing success, and many entrepreneurs fail to adequately prepare for legal battles, legal problems, and legal tasks. Retaining the services of a licensed attorney is an expensive venture for your business, but it is also a venture that can protect your business from tragedy. If your business doesn’t have high quality contracts, professional guidelines for freelance agents and employees, and protective documents and standards in place, a single lawsuit can be the death of all your efforts.
Failing to Understand Your Niche Market
One of the most common new business owner mistakes is a failure to research and understand one’s niche market. Your target population of consumers is changing just as rapidly as your business. Unless you are armed with knowledge of your consumer population’s habits, needs, and desires, you’ll never be able to adapt your business practices to keep up with the consumers who provide your business with profits. Continually researching and exploring your niche market is the only way to avoid this common small business pitfall.
Spending Money that Doesn’t Exist
Financial problems are the number one reason why small businesses fail in the first few years of existence. Many small business owners think that the only way to make money is to start spending money. This is true, in a sense, but you must also be very responsible about the money you spend and how you spend it. If you spend a large sum of money, with the expectation that the spending will generate profits, you could end up drowning in debt if your business ventures don’t pan out.
Ignoring Continuing Education Opportunities
Failing to continually educate oneself is another common mistake that business owners make. Small business owners often become overwhelmed with the daily tasks they must complete to keep their business afloat. The easiest thing to neglect is personal edification and education. However, continually educating yourself in good business practices, marketing standards and strategies, and other subjects will improve your performance as business owner.
Good Faith Agreements
Even though good faith agreements sound nostalgic and all-American, they can actually cause huge problems for a small business. When you make an agreement with a customer, an investor, or another business, be sure that the terms of the agreement are spelled out in a contract and signed by both parties.
Stagnation and Acceptance of “Comfort”
Unless your business is constantly moving forward, adapting, and growing, it will eventually fail to generate profits and expand to fit a changing market. One of the most devastating mistakes that a small business owner can make is allowing a business to stagnate and growing comfortable with the current existence of the business.
These ten mistakes can derail the future of your small business, but they can be avoided with continual and methodical efforts on the part of the small business owner.
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