We recently discussed what it takes to step into business ownership financially prepared. However, starting a business without a strong financial footing isn’t the only misstep prospective entrepreneurs make. In fact, most of the leading causes of business failure can be traced back to rookie mistakes.
Luckily, most of those mistakes are also completely avoidable. Want to know more? Here are the most common mistakes threatening your new small business and how you can overcome them to achieve sustainable success.
Small business ownership isn’t for the faint of heart. It takes grit and determination to build a business from the ground up. Yet passion alone won’t pave the way to success. Small business owners also need the knowledge and skills to make good business decisions.
Free and low-cost resources from the Small Business Administration, Small Business Development Centers, and SCORE provide a basic overview of what it takes to run a business. However, they don’t dive deep into business analytics, corporate finance, and other skills you need to succeed in the competitive small business economy. For that, consider a Master’s in Business Administration. Online MBA programs provide a solid foundation in business administration in as little as 16 months so you can build skills without putting your dreams on hold.
Starting a business also requires a lot of paperwork. Skipping it could leave your business in a vulnerable position.
Paperwork required to start a business includes:
● Incorporation and governance documents.
● Local business licenses.
● Professional trade licenses.
● Federal Tax ID numbers and state sales tax permits.
● Copyright and trademark protections.
● Business insurance policies.
Pay special attention to governance documents in particular. These define business ownership, how your business operates, and rules for making decisions and resolving disputes. If you don’t write governing documents, your business will default to the standard laws in your state which may not be advantageous. We recommend working with a business attorney to develop governing documents.
There’s one more big piece of paperwork that every entrepreneur needs: the business plan. Some experts will tell you a business plan is unnecessary if you’re not seeking outside investment, but funding isn’t the only reason to write a business plan.
A business plan helps you:
● Define your mission and values.
● Assess the feasibility of your business idea.
● Understand your competition.
● Understand your customers.
● Assess business risks.
● Develop a startup budget and revenue model.
● Identify financial needs.
● Document your marketing plan.
● Establish performance metrics.
● Identify unforeseen challenges.
It’s a lot to think about, but that’s why it’s so important to engage in the business planning process before launching your company. Not sure where to start? This guide from the Edward Lowe Foundation breaks down business planning so you can take it one step at a time.
Sometimes business planning reveals that your idea isn’t viable after all. Flawed business models, pricing issues, and a lack of market demand are common causes of business failure that may be highlighted during business validation.
The worst thing you can do when business planning reveals a lack of market validity is to forge ahead anyway. No matter how innovative your idea, it won’t succeed without meeting the needs of the market.
Instead, adapt your business idea to suit market conditions. This may mean improving your product to better serve customers’ needs, changing your business strategy, or starting fresh with a new business idea.
Just because you have a great business idea doesn’t mean customers will be knocking down the door to buy it. Successful small businesses know who their ideal customers are and how to reach them.
TRUEen is one simple way you can lead customers to your business. When you list your small business on TRUEen’s low-cost local business directory, you increase online visibility and generate authentic leads.
Other affordable ways to market a new small business include pay-per-click advertising, social media marketing, and email marketing. If your target audience is local, generate local awareness by sponsoring local events, getting involved in community projects, and co-marketing with other local businesses.
It costs more to gain a customer than to keep a customer. Yet far too many businesses focus only on customer acquisition while taking repeat buyers for granted.
In reality, successful businesses need both. New leads grow your customer base while retention drives customer lifetime value. Loyal customers are also your company’s biggest cheerleaders, attracting new customers through word-of-mouth marketing.
Small businesses that excel at retention use strategies like these to build trust and deliver value to their customers:
● Superior customer service.
● Personalized experiences.
● Content marketing.
● Rewards and special offers.
● Customer referral programs.
● Social responsibility.
You have a steady stream of new leads, a base of loyal customers, and money in the bank. Is it time to scale your small business into something bigger?
Growth is a good thing, but scaling too fast too soon could put your startup at risk. That’s because as your business grows, so do its overhead costs. Scaling without a solid financial plan could leave you working harder without earning more.
Nowhere is the risk of rapid business growth more apparent than in staffing. Employees are expensive and so is turnover. While it’s important that your small business has the capacity to deliver, it’s equally important to hire the right people for your company’s trajectory. If you need to boost manpower but aren’t ready for permanent employees, use outsourcing instead.
Making mistakes is all part of the learning process as a new business owner, but some mistakes have bigger consequences than others. As you prepare to launch your first small business, take the right steps to avoid these common, yet costly mistakes. By taking the time to develop your business acumen, validate your business idea, and protect your business from legal and financial risk, you position your startup for sustainable success.
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