Do you know most new businesses flounder during the first five years? Research has shown that 20-25% of these startups fail during the first year. It’s not always easy to get a small business off the ground. Knowing about the toxic mistakes small business owners make and how to avoid them will increase your chances of success.
Experience they say is the best teacher.
Why not take the experiences of other business owners to heart and learn from them.
Take a close look at the mistakes business owners make and don’t allow them to sabotage your own business.
Prevent problems in management from having a negative impact on your business.
By learning about the different types of mistakes that business owners usually make, you have a better chance to keep your business on track.
Toxic Mistakes Small Business Owners Make And How To Avoid Them
The following are small business mistakes to avoid:
1. Starting A Business With No Plan
Is your business idea a good one?
You will not know for sure unless you sit down and write a business plan.
Preparing a plan takes a lot of time, thoughts, and effort.
You need to do lots of research.
It requires you to look into market potential.
When you invest time in planning, however, you help save time and money later.
When you do business without a plan, you plod your way around in the dark, hoping that luck will bring you success.
It is a formula for failure and a toxic mistake to avoid as a business owner.
Even small businesses need a plan.
A written plan helps you establish your business goals, identify your markets, and look for the right opportunities.
You don’t need a perfect plan.
You simply have to sit down and write a page or two to give your business direction and establish the goals that you want to achieve.
Things in business are never set in stone.
Take the time to update your plan to incorporate any changes that you need to take into account.
2. Failing To Set Clear Objectives
When you set your goals, be as specific as you can be.
Identify your long-term goal; state clearly where you are headed.
Outline your short-term goals; chart the specific steps that will take you in that direction.
When you set clear objectives for your business, you provide meaning and direction to your operations.
3. Not Having A Clear Vision For The Company
Another toxic mistake to avoid as a business owner is lack of a clear vision for your business.
A vision allows you and the people you hire to help you stay on the same page.
It allows you to work together in the same direction and reach for the same goals.
When you know exactly where you want your company to end up in a year, a couple of years, or in five years, you will find it easier to end up exactly where you want to be.
Once you are able to define your vision, you’ll find it easier to rally your team.
4. Not Having Enough Capital
You need capital so you can do what is necessary and remain competitive in the industry.
You don’t need a very large investment.
However, you do need enough money to kick-start growth and complete your projects.
If you don’t have enough growth capital, your business will find it difficult to pay bills, take advantage of new opportunities, and grow.
You have several options to raise your start-up capital.
You could go to a traditional lender for small business financing.
In addition, explore non-traditional alternatives.
Find out if you are eligible for a startup business grant.
5. Underestimating The Importance Of Planning, Forecasting, And Maintaining Positive Cash Flow
A majority of startup businesses don’t make much money at the start.
You need to have adequate funds to live on while establishing your business.
You need to have adequate resources to sustain your business’s survival and growth.
If you start your business without these resources lined up, you are committing one of the more serious toxic mistakes business owners usually fail to avoid.
Don’t wait too long to look for possible financing options.
Manage your cash flow.
Create research-based financial forecasts.
Staying on top of your finances enables you to recognize potential cash crunches ahead of time and look for money in advance.
When you apply for finances while your business is still in fine shape, you are more likely to get approval.
You do not have to make do with less-than-ideal options.
6. Overspending Or Underspending
Create a business budget and stick to it.
You don’t have to get the best equipment, the best marketing assistance, the best software, and the best of everything — if it means spending money that you don’t have.
Look for cheaper and equally viable alternatives.
On the other hand, don’t refuse to spend on anything outright.
Refusing to invest in certain things will considerably limit your opportunities for success.
Be discerning when it comes to spending.
Spend to make significant progress while making your money last as long as it can.
7. Lacking Confidence In Your Product Or Service
Helena Rubinstein is recognized as the first females to make it as a self-made business millionaire.
While other companies were selling the common face cream, Rubinstein built her empire by selling “beauty.”
Know your product. Identify your market.
Formulate your unique marketing proposition based on the unique qualities of your product and your target market.
8. Undervaluing Your Product
Don’t under-price your product in the hope of attracting customers.
You will face mounting price issues – scope creep, the consequences of not taking production costs into account, and failure to make sufficient profit, among others.
Your business is highly likely to fail in the long run.
Do not undermine what you sell.
Appreciate the unique value of your product or service.
Explore the market systematically and thoroughly so that you are able to gauge the finest price entry point for your product.
Some business owners tend to undervalue their product or service and, as a result, under-price it.
They later feel a lot of resentment when they go through the long and frustrating road of trying to recover from undervaluing their goods.
See to it that your price is competitive with others.
Highlight what makes your product better than others so you can justify selling at a higher price.
9. Failing To Appreciate The Value Of Marketing
Having a great product is not enough.
You have to let people know about it.
You have to get them to buy it.
If you want your business to succeed, you have to market it.
Poor marketing is one of the toxic mistakes you should avoid as a business owner.
Some shrewd businessmen start marketing their products long before opening their physical (or virtual) doors to the public.
Marketing can take different forms – traditional advertising, word-of-mouth referrals, and online marketing.
You don’t have to follow set rules to market your product.
But you DO have to market it – in a form that best fits your business, as well as your target audience.
10. Not Being Able To Identify Your Target Audience
It is vital to identify who your ideal market is.
Who are the customers you want to reach? Where do you find them?
What marketing strategies should you apply to make them respond positively to your product?
Even if you have an excellent product, you will find it difficult to sell it if you don’t know who your target audience is.
If you are not able to clearly define your market, you will not know how to best position your product so that it sells.
Comprehensive market research is vital to any business.
It shows you whom to target and the most compelling ways to communicate with and reach them.
When you don’t have a specific audience in mind, you will find it really hard to grow your business and make it thrive.
It sometimes takes a lot of work (and time) to identify exactly who your audience is.
Start with one or two rough personas in mind so you have a framework to work with.
Forge ahead with sales and marketing and observe the responses.
The information will help you identify other marketing strategies that will help reel in more customers.
11. Failing To Listen To Customers
You don’t always know what your customers need or want.
It is prudent to always listen to your customers.
Why are they using your product?
What are the things they look for or value in a product?
Take customer complaints seriously.
They are likely to give you valuable insights about what you can do to improve your product and increase your share of the market.
12. Failing To Nurture Relationships
One of the many different types of mistakes that businesses often make is failing to nurture relationships with customers.
You spend time and effort to make a sale.
After the customer makes the purchase, you let him be. This is a big mistake.
If you are an astute businessman, you will go out of your way to nurture the relationship.
Get to know your customer.
A loyal customer will make repeat purchases and even get his friends to try your product.
If problems crop up, you will find it easier to find mutually acceptable solutions.
13. Failing To Keep Tabs On The Competition
Don’t ignore the competition.
Pay attention to competition not because you want to ape them or to come up with a derivative product or service to sell.
Pay attention to observe what they do well to sell their product, analyze their style, and modify your approach accordingly.
If you have a product that is largely similar to theirs, it may be worthwhile to target their market in similar ways.
Otherwise, figure out what strengths your product has over theirs and think of ways to use these strengths to your advantage.
Preventing Business Mistakes By Using People Skills
Preventing business mistakes largely rests on your skills as a leader.
If you lack genuine insight into why people behave the way they do, you are likely to find it difficult to learn how to avoid mistakes in business.
Take the following tips to heart:
1. Do Not Try To Do Everything Alone.
Trying to do every little thing on your own is one of the small business mistakes to avoid.
While you may have the skills to be a jack of all trades, being one is not likely to help your business succeed.
You only have so much resources and energy.
You need to channel your time and unique expertise to grow and position your business for success.
This is why you can’t do this when you try to do every little task yourself.
If you insist on doing everything by yourself, you will see lackluster results.
You will experience overwork, frustration, and even early burnout.
Moreover, some people will have the training and expertise that you don’t have.
For instance, hiring an accountant is a prudent decision.
You can certainly use his expertise in taxation and financial matters – and save yourself some real headaches (and money!) during tax season.
Get the help that your business needs.
Outsource and delegate certain tasks.
2. Build The Right Team.
Hire the right people.
Look for people who will be able to share your values and attitudes and appreciate your company’s mission.
Check out experience, expertise, and attitude.
Look for self-motivation and dedication.
Look for people who will be of value to your business and who will be there for the long haul.
Be ready to shell out a bit more to get people on board if they are worth the price.
You don’t want to hire mediocre people simply because they come cheap.
3. Practice Strategic Leadership
The success of your team depends on how well you provide leadership.
As a leader, you should be able to see the entire picture.
You have to pay attention to both employee and customer behavior.
You have to act strategically – stay updated, learn from experience, draw insights from pertinent information, and listen to expert advice.
Being a strategic leader, you need to
Get valuable ideas from many sources by listening actively to the people around you.
Learn from industry leaders, mentors, and experts.
Learn how to build a productive and inspiring work culture from the people you work with.
Find out about your customers’ needs and expectations and how to address them by listening to feedback.
Motivate Your Team
The success of your business rests to a significant degree on your ability to motivate the people you work with.
Create a supportive environment. Encourage effective communication. Provide training. Build trust.
Encourage your team members to reach their potentials. Celebrate every small success.
Even if you already have adequate knowledge and the appropriate skills, do not stop trying to learn new things.
Welcome new ideas.
Learn as much as you can about the industry that you are in.
Use all relevant analytics to your advantage.
Use Mistakes To Your Advantage
Do not be afraid to commit mistakes.
Have the guts to test assumptions.
Learn from your failures.
Use past experience to make smarter and well-informed decisions.
4. Be Ready To Face Tough Times.
You can’t build a successful company overnight.
Even if you have an incredible vision and the right product, you will not strike it rich on day one.
Your business is likely to go through difficult times.
It takes a lot of perseverance, hard work, and resilience to make it through tough times.
It takes “blood, sweat, and tears.”
You need a serious sense of commitment, as well as dedication and drive, to see your business through seemingly impossible challenges.
You have to be patient and make lots of sacrifices.
Prepare for the long haul.
Lay a solid foundation for your business by conditioning your mind for a slow but steady build-up.
5. Try To Have A Healthy Work-Life Balance.
Do not work 24/7 or expect your employees to do the same, thinking that this will ensure business success.
Keep in mind that healthy, happy, and well-rounded employees tend to be more efficient and productive than employees who are constantly stressed out and overworked.
Help your employees achieve a healthy work-life balance.
Allow flexible work hours if your employees are capable of doing their jobs well regardless of when or where they work.
If your business is such that flexible working arrangements are not feasible (a retail shop, for instance), think about other options.
Is it possible for employees to work four 10-hour shifts a week, instead of the standard five 8-hour days a week if the schedule works better for them?
There is no fail-proof plan to ensure that your small business startup will succeed.
There are many factors at play that you don’t have total control over.
On the other hand, there is a good number of things that ARE within your control.
It is not easy to run a successful business.
However, it helps to take note of the outlined suggestions about how to avoid mistakes in business.
If you know the common pitfalls that face most small businesses, you will find it easier to avoid them, especially during your business’ first vital formative years.
You will find it easier to make your business successful.