Starting a small business is a dream come true for more and more Americans tired of the corporate life of long commutes, more extended hours, and battling through bureaucracy and office politics to advance their careers and earn more money.
Of course, if owning your own small business was easy, everybody would be doing it.
While the ultimate goals of self-sufficiency, autonomy, and profit are reachable, the quest to get there is usually long and arduous and filled with obstacles that most don’t consider when they get that first gleam of an idea in their eye.
According to Bloomberg, 8 out of every 10 small businesses fail within 18 months of going into business. That’s a steep hill to climb. To ensure your new company is one of the surviving 20%, here’s a list of 6 mistakes to avoid when starting a small business.
Not Enough Planning.
It’s tough to have a great idea and sit on it, but that’s precisely what you should do before taking your company into the public eye. It’s great to daydream about the way your business will look five years from now, but your focus has to be on the plan for today, tomorrow, and next week. Let’s say your great idea is a combination bookmark/book light that stores up solar energy in the day and powers your reading habits for up to four hours at a time in the dark.
Before you start building your website, you have to make some huge decisions such as:
- How much does it cost to produce one unit?
- What will be the price of one unit?
- Is the target audience individual readers or places like bookstores and electronics retailers?
- What is the product called?
- Who is your competition?
- What differentiates your product from the competition?
- Can units be bought online?
- How are units shipped if purchased online?
- What sort of marketing or advertising will you do to promote the product?
Until these questions have answers, you are not prepared to move forward.
Not Preparing Your Personal Life.
What happens when you stop working a corporate job to go into business for yourself? You stop making money for at least some time, and you no longer have vacation days and sick days. That sounds lousy from a personal standpoint, so imagine how your spouse, kids, relatives, and friends are going to feel about it.
No matter how consumed you are by your new venture, you have to take care of your family first. To do so, establish a nest egg of savings to pay for your bills, your groceries, and everything else that goes with it until your new business starts turning a profit. You also have to establish your commitment to the labors ahead. No more weekend getaways or Friday morning rounds of golf for a while. You’ll be pouring every available minute of your time into getting things off the ground.
Not Preparing An Elevator Speech For Investors And Buyers.
The average trip in an elevator takes about 60 seconds. That’s how much time you’ll have to sell your product to the standard person who might turn into an investor in your business or a consumer of your product. If you can’t establish what it is and what problem it solves in simple terms in that one-minute window, your goose is cooked.
In our combination bookmark/book light example, one of your first tasks will be to identify what your market is. While millions of people read books every day, a growing percentage of them do it by using digital devices such as tablets.
By definition, these readers don’t need your product because the tablet acts as both a light source and bookmark. Thus, the challenge becomes using data to see what demographics are the most invested in physical copies of books and creating a strategy based on how said consumers like to receive advertisements for new products.
Using data can also lead you to determine what sort of larger retailers make the most sense to attempt selling your product to in mass quantities. Is it a reading accessory to be sold by the likes of Barnes & Noble? An electronic device better suited to the likes of Best Buy?
Or is its niche something that can best be packaged with other products in a format like the Home Shopping Network? The knowledge derived from data is your best shot at making smart decisions that don’t waste your precious commodities of time and money.
Refusing To Be Flexible.
Your combination bookmark/book light might seem like the best thing since sliced bread in your mind. But it could be that it’s not the right idea for making money right now. Business partners might love the solar-powered light, but think it makes a clunky bookmark.
Or they might feel the light is a dud, but your cool metallurgy on the bookmark can be a customized product that becomes a cool gift item. Don’t marry yourself to your product’s name, design, or anything else about your business. If something isn’t working, don’t be afraid to change it. If something is successful, run with it until it stops working.
Involving Too Many Partners At The Start.
Start small; you can always add extra personnel if needed. The opposite is a lot more difficult. Too often, people involve family and friends in startup ventures, giving everyone an executive title and promising them percentages of future profits. Does your startup need your brother-in-law as its CFO and your college roommate as Vice-President of Internet Technology?
The most important person in your startup business is you. That means shouldering the entirety of the workload until you reach a point where you need help. Even then, don’t start hiring full-time employees until you recognize a clear, consistent need for services or skills that you do not have. Employing freelancers or part-time employees to take on one-time projects or recurring can save you the financial burden of hiring someone full time until your company grows into those shoes.