Getting a company up and running is an exciting time. You likely have a strong passion for what you’re doing and a vision for where you’d like to go in the next few years. Everything is new, fresh and exciting. Unfortunately, you’re also inexperienced in running a new business and may make mistakes before you realize what’s happening.
There are approximately 30.7 million small businesses in the United States alone. About 20% of small businesses fail in their first year. The number increases at the five-year and 10-year mark. Some of the reasons for failure are completely controllable if you know what pitfalls to avoid. To help your business thrive, we’ve come up with 11 common mistakes new business owners make, and how you can steer clear of them.
Mistake #1: Not Saving Enough Money
Starting a new business is challenging. Cash flow is one of the top reasons businesses fail, but many people jump into a new business without having much money in the bank. You might be able to start your new company on a shoestring. But what happens when you can’t collect a salary for yourself for six months—or even for two years? How will you pay your bills?
Before starting a business, make sure you have enough savings to cover your expenses—both regular and unexpected. You also need extra money for your business in case it takes time to start making a profit. You’ll still have to pay rent, utilities, inventory and employees during that time.
Mistake #2: Working Too Many Hours
As a startup, you’re likely on a limited budget. You probably think you can save a little money by doing all the work yourself. However, working nonstop and taking on too many tasks means nothing gets your full attention, and you wind up burned out and ready to quit. Invest in people who are experts in what they do, even if you only hire them on a contract basis. Pay the marketer to come up with a killer ad campaign, or hire an accountant to keep your books in order. Take on a part-time employee so you can be home in the evenings with your family or take an occasional day off for mental health.
Mistake #3: Not Creating a Space for Employees
If you have employees, they need to feel they are a part of a team and you care for them. If you don’t put their needs first, you may lose some of your top performers. Let them dress down on Fridays, offer team-building activities, give them paid time off on holidays and provide a comfortable space for their breaks and lunch hour. Encourage your employees to practice self-care. Require they take a break or two sometime during the day to refresh themselves and step away from work, so they can come back with a fresh perspective and renewed energy.
Mistake #4: Not Listening to Mentors
If you’re smart, you’ll take on a mentor or two before you begin your journey as a new business owner. A mentor is typically someone who’s already accomplished what you’re trying to. Look for a successful businessperson who isn’t one of your direct competitors and ask them to take you under their wing. Ask for advice when you need it and listen to any feedback the person offers. They’ve been through the first year of starting a business, and can help you avoid the issues they ran into.
Mistake #5: Listening to Everyone
While it is essential to have experienced people to draw on for information, you also have to learn to trust your instincts and not listen to others too much. There are some things about your business no one else understands, and you should always have the final say. Will you make mistakes? Definitely, but with a combination of trusting your gut and listening to experienced people, you’ll wind up on top.
Mistake #6: Not Adapting to the Marketplace
Around 42% of small businesses fail because there isn’t a market need for their product or service. If you get started and find there isn’t as much demand for your products or services as you thought, be ready with a backup plan for finding more business. For example, if you open a fine dining restaurant and your reservation book is empty, can you offer family-style dining options on some nights? You may be offering something people in the area don’t want or can’t afford.
Mistake #7: Taking on Too Many Partners
Starting a new business by yourself is a bit overwhelming, which is why some people take on multiple partners. However, the more people who own a part of your business, the more ways you’ll need to split your profits. It can also be stressful if everyone isn’t on the same page about how to spend money and move forward. If at all possible, start a business where you’re the sole proprietor. You can still take on investors or pull in people to manage some of the business. At the end of the year, though, if you’re the one who has the final say, you’ll find your business does better than if there are multiple partners.
Mistake #8: Networking Too Much
You’ve heard networking benefits business owners. While that is true, you can also spend too much time networking and neglect other parts of your business that are at least equally important. Create a balance between networking and other activities such as marketing, coming up with new tactics to reach customers and taking care of the organizational aspects of your business.
Mistake #9: Ordering Too Much Inventory
Your first holiday season as a business owner is on the horizon, so you stock up on what you think might be the hot products of the season. The problem? You don’t yet have the experience or data to know what your target audience wants for the holidays. You may wind up with a lot of inventory you can’t move at all, or have to sell at such discounted prices that you make zero profit. On top of that, invoices on the products you ordered are net-30, and you have to pay them before Christmas even arrives. Be cautious about your ordering habits until you get a handle on your sales trends.
Mistake #10: Not Investing in Marketing
Getting the word out about your new business is half the battle. If you don’t spend time and money on marketing campaigns, it isn’t very likely you’ll reach your sales goals. To grow your business past your immediate circle of family and friends, you have to come up with ways to bring new leads in. You can try anything from social media ad campaigns to attending local events to sending out mailers to starting a word-of-mouth referral program. If you aren’t sure where to start, invest in an experienced local marketing professional who can help you come up with a plan based on your budget.
Mistake #11: Not Reaching for the Stars
Change is scary. It’s much easier to stay in your lane than to take on that multi-national corporation you’ve dreamed of competing against. However, if you don’t stretch past what you think is possible, you’ll never achieve much. You might be comfortable, but you won’t be highly successful. While you don’t want to risk your entire business with potential failures, commit to stepping outside your comfort zone once or twice a year. Go after that big client you think you can’t land, sell a product you aren’t sure about or launch your online portal.
Find Success in Year One
Your first year of business is an exciting and challenging 12 months. Focus on the things you can control, move forward with a plan and beat the odds of businesses that fail. With a little attention to detail, the right employees and avoiding the issues other business owners face, you’ll move into year two with a good idea of what it takes to succeed in business.