12 Mistakes to Avoid When Starting a Small Business
Starting a business for a product or service you're passionate about is thrilling and full of promise. However, there are many things you must do to make everything go as smoothly as possible and ensure you’re protected if something goes wrong.
There are some key things to consider when starting your own business. According to Wix, you are building an ecosystem you plan to create, expand, and scale over time. Some things that comprise your startup ecosystem include coming up with a business idea, choosing a name, determining how you'll do business, drafting a business plan, obtaining financing, designing a website, conducting marketing research, launching marketing campaigns, publishing social media posts, and building your team.
It's a lot to consider for a business owner, and even with your best efforts, plenty of things can go wrong with your new business. While many business leaders experience some mistakes and learn from them, it's better to know what you could face in advance and protect yourself.
The key to avoiding mistakes is identifying them beforehand and ensuring you don't make them or can recover if you do. The following is a list of 12 business mistakes to avoid when starting your small business to ensure a healthy and successful enterprise.
1. Not Creating a Business Plan
You might see articles saying that you don't need a business plan or that a business plan is a waste of time, but our JWU business administration team couldn't disagree more. According to the U.S. Small Business Administration (SBA), a well-developed business plan serves as a map or guide, providing a solid structure for your business. It informs you about how to run and grow your business idea in the short and long term.
Without a business plan, you risk developing your company lacking a firm strategy you can review when things aren't going as you thought they would. A business plan keeps you on track and accountable to your internal team and external stakeholders.
Additionally, you risk losing funding without a business plan because investors want to see a plan. So, while it isn't the most exciting part of your new business, it's not something you want to leave out.
2. Not Investing in Marketing
According to Wishpond, marketing professionals who developed a robust marketing plan were 313% more likely to find success than those who didn't. Without powerful marketing and research, you risk missing out on:
- Understanding your target audience
- Developing a customer avatar
- Determining and analyzing your competitors
- Uncovering and expressing your unique selling proposition (USP)
- Working out your pricing strategy
- Comparing previous marketing campaigns to assess your ROI and how you can improve
- Coming up with the best metrics to measure your marketing campaign's success
3. Not Obtaining the Correct Insurance
Insurance is another area most entrepreneurs would rather skip. It's boring and has nothing to do with your exciting idea. However, getting the right insurance offers protection if something goes wrong with your business, such as a workplace accident like a fall or theft of a computer or printer.
It would be best if you had a minimum of liability insurance for your business to protect your company from any business-related litigation. Business property insurance will help if you experience an event that results in the loss, destruction, or theft of your office equipment.
4. Not Asking for Help
As a new entrepreneur, you will have questions and run into problems. When you don't ask for help, you risk damaging your business and reputation or short-changing your customers and losing their trust. Reaching out to trusted professionals who can help you navigate uncharted waters in business is essential. Whether you reach out to a former professor, colleague, or friendly competitor, you need to form and nurture a trusted network to help you succeed.
5. Not Understanding the Financials
Another common mistake in small businesses is that new entrepreneurs sometimes don't understand the financials, especially when they experience instant and rapid growth. These professionals are caught off guard, thinking they can keep operations fast and lean indefinitely. But without up-to-date financials, you risk missing out on securing the loan you need to scale up and buy new equipment, lease a bigger space, or hire new employees.
6. Not Knowing Your Strengths and Weaknesses
You will excel at running your business in certain regards and falter in other areas. You must know your strengths and weaknesses and figure out how to handle them. For example, if you want to manage hiring responsibilities but realize you can't keep up with payroll or financials, outsource these duties to industry professionals until you can afford to hire internal professionals to get everything done effectively and on time.
7. Not Embracing Technology
Technology levels the playing field for startups today, regardless of the industry. It gets your business up, running, and scaling quickly and efficiently. From network connections and hardware setups to social media accounts and cloud storage, embracing technology is the ace in your pocket. One of the most useful tools in any business's technology toolbox is spreadsheet software, such as Microsoft Excel or Google Sheets. With Excel tips and tricks, you can keep track of expenses, create budgets, and analyze data to make informed decisions. While upfront costs can be high, the long-term costs of not investing in technology could be devastating. Your competition will have the latest technology to support their business, and you should have it too.
8. Not Hiring the Right People
New small business owners often struggle with the hiring process because they're unsure when and how to bring in new people. They want to do as much as possible themselves, but they wear themselves thin and run ragged, leaving their business and customers vulnerable to failure.
It's just as dangerous to hire the wrong people. Employee turnover is expensive, and a costly resignation or termination could put a massive dent in your budget and harm your business reputation, depending on what goes wrong when the wrong person is hired. As you start scaling your business and need to bring in new people, consider working with a consultant or external recruiter to ensure a good fit.
9. Not Listening to Feedback
The same people you reach out to for help could offer constructive feedback to help you improve or correct the course. You should also definitely listen to employee and customer feedback to get ideas about what your business is doing right and what you can improve.
Conduct customer and employee surveys, and reach out to a consultant to give you objective, constructive insights into your business and what you could do differently to improve your company.
10. Not Understanding the Competition
Identifying, analyzing, and understanding the competition helps you position and sell your products and services and make better decisions about marketing campaigns, product launches, and other vital business considerations while reducing risk, time, expense, and required resources.
The most important things you need to know about your competitors are:
- Who they are
- How competitive they are, as far as their offerings and target audience
- Their strengths and weaknesses, especially compared to yours
- What their plans are for products, services, and marketing
11. Not Understanding Your Target Audience
When starting out, you might think you know your target audience. However, as your business progresses, you might realize that you need to reduce or expand the scope of your target audience, or you might need to redefine who your target audience is.
Worse still, some business owners don't clearly know their target audience. They launch their business with the idea in mind, but without a clue what their ideal customer persona might be.
In any of those cases, it's time to task your marketing team with conducting market research to identify your target audience and learn how to reach them.
12. Not Having Goals in Place
Having goals in place gives your business direction. Defining and executing your vision is difficult without solid goals, leaving room for errors and a lack of accountability. Goals help you improve your product or service, identify your target audience, launch effective marketing campaigns, and increase sales. What's not to love about having goals in place?
You'll have a mountain of information to process when starting your new business, and the Bachelor of Science in Business Administration (BSBA) in Entrepreneurship at Johnson & Wales University will help you avoid pitfalls that could harm your customers or clients and your business reputation.
At JWU, you'll learn all the basics of starting a small business, including the necessary concepts, skills, and values. Our instructors tackle what can go wrong if you aren't fully prepared to build and run a tight ship from the moment you decide to start a business.
For more information about completing your BSBA in Entrepreneurship online, complete the Request Info form, call 855-JWU-1881, or email [email protected].