The statistics are alarming, and most times, they could be demoralizing. But they are true all the same. Fact is, not every business idea will see the light of day and for those that get started, 25% will fail within the first year, 55% within 5 years and 71% within 10 years! (Source)
Now, if you’ve had enough of working as a “wage slave” and you are thinking of stepping out on your own by starting your own business, this really is not to scare you but to help you to be better prepared. Of course, it is a good thing that you’ve got a great idea you that want to share with the world by starting a business. Far too many ambitious and intelligent people have such great business ideas, but never pursue them out of fear. For this can-do attitude, I salute you!
However, while launching a company is easier today than it has been in the past, there are still potential pitfalls which could destroy your great idea. It is better therefore that you learn the potential risks that could sink you business boat even before you start so you can do well in avoiding them instead of regretting later on. Here are some of the major ones which you need to avoid.
Small Business Startup Mistakes to Avoid
1. Hiring the Wrong Staff
The first big mistake you need to be aware of is hiring the wrong staff. If you’ve just got out of education and you’re raring to get your business up and running, then this is one of the big ones you have to look out for. Choosing the wrong people to work at your company may be one of the most expensive mistakes new entrepreneurs are capable of. With a bad enough team, you’ll not only throw a lot of money down the drain, but also grind down your overall business morale.
Recently, you may have met someone you share all kinds of opinions and ideas with, and be just about ready to launch a business with that person. Bringing your friends into the venture will make for a pretty pleasant opening period, true. However, in the long run, those very people may end up killing your business.
It’s better to hire someone who’s annoying but professional than your best friend who knows nothing about business. Hire people with varied skill-sets and a common vision, rather than people you get a good vibe off.
2. Picking the Wrong Price
If you’re running a manufacturing business, then one of the biggest mistakes you can make is bad pricing. This is one thing that will destroy a B2B firm faster than you can imagine, so it’s important not to slip into it.
There are a lot of causes for bad pricing, but one of the most common is a poor grip on your business’s costs. From the payments on your merchant cash advance to the materials you need to logistics, the costs never end! You may hate number-crunching, but don’t be tempted to round up figures, or leave anything out. You can’t afford any laziness here!
You need to be taking everything into account and getting an accurate cost-to-markup figure. While you might be able to recover from bad pricing through good luck and perseverance, it’s not the kind of thing you want to risk.
Before you sign off a single invoice, make sure you understand pricing and all the factors in your industry that influence it.
3. Lack of Flexibility
Another common mistake is going into business with a lack of flexibility. If you land on an absolutely brilliant idea, then you may build it up into this perfect image of everything you want your business to be. After some time overcoming financial and personal obstacles, it’s easy to become attached to this idea. Lean too much towards it, and you could end up putting the big launch off for far too long. Remember that the longer you’re not trading, the longer it will take to actually start turning a profit.
If your business idea hinges on a new program or an app, then this is a particularly big danger you have to look out for. A huge amount of techy entrepreneurs start to develop a program, and won’t consider pitching it until it’s absolutely perfect. This leads to a lot of spending, wasted time, and disgruntled investors. In fact, the only people who benefit here will be your suppliers!
This applies even when your product is matched exactly to your vision. You’ll still need to put money into advertising and distribution to make sure your business doesn’t fizzle out. Grind down too much resources too quickly, and you’ll end up with no product and a pretty substantial debt over your head.
4. Failing to Outsource
Failing to outsource when you definitely should is another common mistake. Again, this is tied in heavily with the software and technology niche. You don’t have to know too much of the technical details to be a successful businessperson. Richard Branson, CEO of this little company called Virgin, didn’t even go to university, and yet managed to expand into too many areas for me to list!
However, you certainly need some kind of expertise in your camp, whether it’s from you or from outside sources. Let’s say you have a great idea for a new program. You know exactly what it’s going to do and how you’d like it to look, but you know absolutely nothing about coding or software development.
Some entrepreneurs are fixed on the idea of independence (or at least reduced costs) and will put off outsourcing for as long as possible. This is something you probably can’t afford to do. Either hire some permanent, in-house experts in your industry, or outsource the work to a trusted professional.
While you probably won’t have all that much to worry about after this, it’s also a good idea to become savvy about your industry. I’m not talking about re-starting your whole formal education here. However, if you hire in some specialists who put across a professional image this isn’t necessarily a reflection of their worth. If you’re spending money on a service that isn’t doing anything for your business, you’d want to know sooner rather than later, right?
When you’re trying to take your business from an idea to a reality, make sure you avoid these big mistakes. I don’t mean to alarm you, but this post is only the tip of the iceberg! Starting a business is a very risky move, which can be undone with all kinds of other factors. However, if you keep yourself informed and on top of all your possible risks, you’ll stand a much better chance of success!
Over to you: Of these common mistakes which do you think is actually the BIGGEST? Share with us in your comments below.