What are fatal mistakes that first time business owners make and can easily avoid? If you want to start a business, read through the following list of business mistakes and take them to heart. Any one of them could sabotage your new business venture and turn it into a failure rather than a success.
These are the big mistakes to avoid when you're starting out:
1) Not doing a business plan.
If I had even just fifty cents for every time someone asked me “Is this a good business idea?” over the years, I’d be a wealthy woman.
The problem is, unless I write a business plan, I have no idea – and you won’t, either. That’s the main purpose of a business plan. There are other good reasons, too; see 5 Reasons for Writing a Business Plan to learn more.
Yes, it’s time-consuming and demands a lot of research, but investing time now will save you so much time and money later.
2) Doing what you love.
In my opinion, the person who first said “Do what you love” should be shot. Or at least forced to eat seven bad restaurant meals in a row.
It sounds fine in theory, but the reality is there are a whole lot of people out there who love things they’re not good at. My official advice? Don’t do what you love; do what you’re good at and what people will pay you (well) for. It’s not as catchy, but it’s a whole lot more profitable – and isn't making a profit the reason you're opening a business?
3) Not doing any market research.
I see increasing numbers of people starting businesses without bothering to do any of this – and then being heartbroken when their new business, which they’ve invested so much time and money in, collapses.
Test your products and service first before you start a business. If you don’t, you have no idea if people are even going to want to buy them. You may think you make the tastiest pierogi in all the world. But will anyone else? Learn who to Do Your Own Market Research.
4) Ignoring the competition.
Ignoring the competition is another potentially fatal business mistake.
Simple question #1: If you’re selling your thingamabobs for $10 apiece and Vera down the street is selling her thingamabobs for $6 apiece, how many thingamabobs are you going to sell?
And what if Vera’s thingamabobs look/smell/feel/taste better than yours? 6 Ways to Find Out What the Competition is Up To will show you how to keep tabs on the competition that matters.
Another aspect of competition you need to understand is market saturation. The pie is only so big, so to speak, for every product or service. So, for instance, if you want to open a dog grooming business, there may not be any “room” left in your local area to do so because of the number of dog grooming businesses that already exist.
5) Not taking into account your own strengths and weaknesses.
We all have them. Unfortunately, sometimes our strengths or weaknesses don’t fit well with the business model we want to use, leading to disastrous results. For example, if you’re not a friendly, outgoing type of person with good people skills, retail is not for you.
It doesn’t matter how many years you’ve dreamed of opening that ice cream parlour or book store, it’s not for you.
That doesn’t mean you can’t buy such a business or start one yourself, but for it to succeed, you need to be aware that working behind the counter is not something you should be doing; you’ll need to hire staff right away. (Here’s what you need to know about Hiring Employees in Canada.)
6) Not understanding what you’re actually selling.
Helena Rubinstein, the first self-made female millionaire, didn’t become rich selling face cream; she became rich selling beauty. ("There are no ugly women,” she used to say, “only lazy ones”.) If your new business is going to be successful, you need to know what you’re actually selling and craft your Unique Selling Propositionaccordingly.
7) Not making sure you have enough money.
Ninety-five percent of businesses will not make money when they first open and a large proportion of new businesses will not make significant money for years. (The exception, the five percent that make money when they first open, is for businesses that are actually just “carry-overs”, employees who become contractors, a fairly common practice in industries such as IT.)
Which means you (and your family) have to have enough money to live on while your new business is getting established, as well as enough money for the business to survive and grow. Not getting the money to do this lined up before you start your small business is a serious mistake.
Small business financing of some kind is the most obvious way to do this, eitherthrough a traditional lender or through a non-traditional alternative. (See 5 Creative Ways to Fund Your New Business.) Perhaps you can qualify for a start up grant.
How to Get Your New Small Business to Make Money includes some other ways you can bring in bucks while starting up.
8) Not investing in marketing.
Following the common advice “Build it and they will come” is another serious business mistake. Come where? Why? Or even when? No one will know without some effective marketing. (How to Create an Effective Sales and Marketing Strategyexplains the basics.
Far too many small businesses are reluctant to spend any money on marketing, let alone a significant amount. Free marketing can be excellent – but most free marketing strategies take a significant amount of time before they become effective. (Referrals and social media marketing are examples.)
Create a marketing plan, set up some marketing campaigns, and keep doing it if you want your business to be successful.
My best tip? Market your business before you open it. There’s no rule that says you have to wait until your physical or virtual doors are actually open.
9) Not bothering with any online marketing.
One way or another, your small business has to be online. You may or may notneed a website (many individuals who provide services use other “homes” on the web, such as Facebook or LinkedIn pages) but your business needs to be able to be found by and promoted to the ever increasing number of people who use the web to find the products and services they want.
If you’re not going to do anything else, establish some sort of home base for your business online and be sure that your small business is listed in various online directories. Actively marketing your small business online is even better and will give it a far better chance of reaching your customers.
One possibility is to engage customers through social media. Learn How to Create a Social Media Plan.
10) Trying to do everything yourself.
You can’t. It’s that simple and that aggravating. Running a small business, even if it’s a one person business, involves so many different tasks that no one person can do them all well. Even if each of us was perfect and had all the skills to do an outstanding job at whatever we set our hands to, each of us is still constrained by time. Most days, I predict, you’ll be lucky if you even get done what you planned to get done when your day started.
So sidestep the mistake of trying to do it all and increase the chance of your new business succeeding by getting the help you need from the get-go. Learn How to Delegate, hire and outsource to make the most of your skills and benefit from outside expertise. For example, do you really need to do your own accounting?Accountants have a lot more financial and tax knowledge than you have, more than likely, and can save you a bundle of time (and even money!) at tax-time.
(Speaking of outside expertise, have you thought about Creating an Advisory Board for your small business? It can give you a real management advantage.)
Who Doesn’t Want to Succeed?
I’ve yet to meet a person who wants to start a business that’s quickly going to go under.
If starting a business is in your future, understand that starting a business is a process, not an event. If you take the time to do the thinking and the research and avoid the business mistakes discussed above, you’ll hugely increase the likelihood of your new business succeeding.
Chris Corey
CMO Markethive Inc
By Susan Ward
Updated August 16, 2016
Alan Zibluk – Markethive Founding Member