Mistakes that can Kill Small Businesses
If you're planning on starting your own business, you're not alone. However, out of all the new companies that go through the formation process, 60% fail within three years of being in business.
There are things you can do which will help you stay out of being one of the statistics. This post will hopefully help you on your journey to avoid these mistakes.
Mistake Number 1: Underestimating the power of experience
You might think that starting your business in your younger years is the best thing to do which you've got the time ahead of you to make it a success. However, research has shown that those with more life experience are more likely to run a successful business.
Those in the older generation have had time to study their chosen industry and learn how it works before diving into the deep end of business ownership, while at the same time growing their network who can then be leveraged for their collective experience.
While you may go into the same industry as the older person, your ways of dealing with any problems encountered will be different due to the levels of experience between you.
This doesn't mean that you shouldn't go into business if you're of the younger generation, it just means you may need to seek out the advice of industry experts to help make your business a success. Their experience is going to be invaluable to you as you embark on your journey.
Not seeking help from the experts is something that can be really damaging to small businesses.
Mistake Number 2: Developing something nobody wants
Passion projects can be a great way to start a business, they make the owners happy and more driven to succeed. However, business owners can be as passionate as they like over the product, that doesn't mean people will want to buy it.
There can be several reasons why businesses like this fail, including:
- The product is too expensive in the market
- The niche is already oversaturated
- The concept is poor
- There are already better alternatives in the market
One way you can avoid this happening is through carrying out thorough market research before jumping into the deep end. Just don't assume that because you like your product that everyone will want to buy it.
Mistake Number 3: Blowing your budget
While it may be true that you need to spend money to make money, maybe it should be added that "you don't need to spend all the money". Most businesses take several years before they turn a profit, so it's understandable that some businesses fail before this point.
One of the problems here is that business owners get excited that they're branching out on their own and they set up all the foundational work possible (including getting the best possible team in place) before even beginning of thinking to sell their product.
When starting a business, you need to think of two key concepts - growth and sustainability. Start out by looking at the running costs and the money you need to make to keep doing what you're doing. Then if you have any money left in the budget, look at how you grow and improve your processes.
Just don't forget, if your growth leads to more regular expenditure, you need to take that into account with your sustainability figures.
Mistake Number 4: You have a weak team
If you have poor team dynamics, it's likely leading to other problems such as toxic working environments and skills shortages. These can lead to any possible successes being smothered. You need to make sure that your team is capable of doing whatever it takes to make the business successful.
Most business owners turn to their friends and family to be a part of their team. While you might have a great relationship with your friends and family, do they have what you need for the business? What you need is business sense, ideas, and industry experience to really make your team great.
If your friends and family aren't a part of your team and you need to hire people, make sure you're hiring the right people at the right time.
Hiring the right person into the wrong position can lead to increased expenditure in the long run. This can come from the hire making mistakes or not being interested in the role meaning they're not upselling as much as they could be.
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