Common Mistakes to Avoid When Starting a Business
Starting a business can be an exhilarating experience; the thought of becoming your own boss, building something from zero, and achieving financial independence can provide one with a sense of empowerment. However, the truth is that countless startups end up failing not necessarily because their “idea” itself was flawed but due to mistakes that were preventable at the beginning stages of operations.
In many ways, beginning a company is akin to learning how to ride a bicycle. While some tumbles are inevitable, you may reduce the likelihood of experiencing certain tumbles by being aware of where the potential bumps are during the course of your journey. We intend to provide guidance on this common error made by first-time entrepreneurs and how they might be able to mitigate or eliminate them.
1.Failing to Create a Business Plan Before Starting Your New Business
A common mistake entrepreneurs make when launching their own business is to jump in with enthusiasm without creating a well-thought-out plan or strategy for moving forward with their new business. Enthusiasm is important, but without any clear direction, it can lead to frustration and wasted time and effort.
Importance of a Business Plan
A business plan gives you direction, like a road map. A business plan will help you answer the following questions:
What product or service do I want to sell?
Who will be my clients?
How will I generate profits from my business?
What are my potential obstacles?
If you don’t have a business plan, you are guessing. Guessing can lead to added expense.
How to Prevent This Mistake
Don’t get carried away writing a 50-page business plan! Keep it simple:
Identify your product/service and potential client base.
Establish short- and long-term goals.
Outline how much you intend to charge for your products/services and any other anticipated costs.
Gaining clarity during the start-up phase will reduce your stress later.
2.Not Taking the Time to Do Market Research
People tend to fall in love with their guiding idea and expect that others will love it as well. Regrettably, the market does not subscribe to this expectation.
Not Conducting Market Research is Risky:
A business will go out of business if nobody wants what is being sold regardless of how well the business was executed. The lack of demand is ranked among the top reasons businesses go out of business.
How to Avoid this Pitfall:
To verify demand for your product or service prior to launching:
Investigate your competition
Speak with individuals who may be purchasing your products/services
Validate demand through surveys, social media, and performing small test launches
Always ensure to validate demand before committing to a large investment.
3.Underestimating Your Startup and Operating Costs
People believe they can figure out the finance section of their business plan after their business is already open, and that belief will end up sinking their firm.
Business Owners Often Underestimate the Hidden Costs of Starting a Business
Marketing & advertising (this can often include promotional items/samples sent before launch)
Software and tools used to operate the business
Legal and tax fees
Unexpected operating costs highly contribute to business closures.
Avoiding This Common Mistake
Plan and Budget Effectively. Cost and time estimates are usually lower than what it will actually cost and take to accomplish the task or project. If you don’t have a budget or a financial cushion, it could be the difference between a successful business or shutting your doors.
4.Trying to Do Everything by Yourself
Most entrepreneurs starting a new venture will take on all of the tasks necessary to run their business: Marketing, Sales, Customer Service, Accounting, etc. Although this approach may allow an entrepreneur to get through the early stages of their business, it’s not a long-term solution and it will not allow them to scale their business.
The Problems Associated with Doing Everything Yourself are:
Burnout. When the entrepreneur is constantly overwhelmed, they are unable to make good, effective decisions and grow their business.
How can you avoid this mistake?
Outsource tasks you are not good at.
Use automation tools.
Request Help from a Mentor/Professional.
Successful business owners understand when it’s time to delegate tasks and focus on growing their business.
5.Inadequate Management of Cash Flow
It is possible to show a profit while still running out of cash. Cash flow-related reasons for closing down businesses happen much quicker than low revenue.
Understanding Cash Flow:
Cash flow defines your business’s inflow(s) of cash vs. your outflow(s) of cash. The timing of cash flows can severely impact your business. You may experience major difficulties from high expenditures and slow revenues.
How to Avoid This Error:
Determine where you are receiving and spending cash(e.g., monthly), keeping our monthly report up to date.
Separate your Business Finances from your Personal Finances.
Ensure that you have an emergency fund to help during the periods of cash flow problems.
Be prompt in sending out invoices and following up on the payment status.
Cash is considered the air that your business breathes. Protect it.
6.Disregarding Your Marketing and Branding
The statement “If you build it they will come” is one of the top 10 business myths.
Why You Must Have a Marketing Plan:
Regardless of the quality of your product, you will never sell it unless customers know about it.
Ways to Avoid This Error:
Determine your brand identity.
Utilize social media accounts properly.
Spend money for the creation of content and/or advertising.
Concentrate on communicating value rather than product features.
Instead of being an expense, consider marketing an investment.
7.Not Understanding the Target Market
When selling to everyone, you are selling to no one.
The Shortcomings of Targeting a Broad Audience
Your message will not be relevant to anyone when it is too general and does not resonate emotionally with them.
How to Prevent This Mistake
Clearly define what your ideal customer looks like:
Gender, age, location
Pain points, issues that are causing them pain
Buying habits, preferences
When you know who your audience is, it will become easier to sell to them.
8.Pricing Your Products/Services Incorrectly
Many beginners are afraid of pricing too high because they fear that they will not attract customers or appear to be competitive.
Why Underpricing is Risky
Having low prices can result in:
Reduced profit margin
Attracting low-quality customers
Devaluing your brand
How to Prevent This Mistake
Determine your price based on value rather than fear. Take into account your cost, the average price range of other similar products/services in the market, and the transformation that you provide to your clients. You should always prefer to have fewer, higher-quality clients than to have a large number of clients who are unprofitable.
9.The Danger of Rigidity. Businesses that do not change or learn will eventually fail
To Avoid The Mistake of Rigidity:
Be sure to track performance metrics, be open to feedback from customers, stay abreast of trends within the industry, and be prepared to pivot as needed. Being flexible offers businesses an advantage over others.
10.The Danger of Neglecting Compliance and Legal Requirements.
If you do not comply with or are not aware of legal matters, your business can close.
Common Mistakes:
Not registering your business, not checking licenses or permits, being unaware of tax obligations, and not fully understanding contracts or agreements.
To Avoid this Mistake:
Seek the advice of a professional at the start-up phase and ensure you have access to the right resources to set up your business properly.
11.The Danger of Expecting Instant Success.
Social media constantly present us with stories of businesses that achieved success overnight, but they do not tell us how they got there (through years of hard work).
How Unrealistic Expectations Hurt: So many people quit trying because they don’t see results immediately and do not continue working toward their goals.
To Avoid This Mistake:
Take your time. Build your business over time by treating it like you would any other long-term project. You will build momentum if you continue working towards your goal.
Having unrealistic expectations about Instant Success
You see the stories of people on social media who have achieved overnight success; you rarely, however, hear about all the years of hard work that went into achieving that success.
Realistic Expectations Are Important
Once people do not see fast results from their efforts, they often get discouraged and quit their efforts before they achieve anything.
How to Prevent Yourself from Making This Mistake
It is important to view your business as a long-term project, not something that will happen overnight. Although progress may initially be slow, when you consistently create momentum, your business will eventually grow at a faster pace.
12.Not Personally Engaging with Your Customers
A Happy Customer = A Successful Business
The reason that customer experience is important is because satisfied customers:
1.) Come back and buy again
2.) Refer their friends and family members to your business
3.) Build your reputation as an entrepreneur
How to Prevent Creating an Unhappy Customer
1.) Communicate clearly with your customers.
2.) Deliver on your promises to your customers.
3.) Handle complaints in a professional way.
4.) Always strive to exceed your customer’s expectations.
Never underestimate the value of having a customer who has faith in your business.
In Summary
Starting a business is a learning experience filled with struggles and challenges. Mistakes are inevitable. However, there are many mistakes that can be avoided by planning your business and monitoring your expenses according to good sound business practices, by understanding your target audience, and by being willing to be flexible in your approach to your business.
The most successful entrepreneurs are not those who have never failed; they are the entrepreneurs who were able to learn lessons from their mistakes quickly and continue on their journey. The most important question for you is this
