5 mistakes to avoid when starting a small business
There are many pitfalls when you start out on your own with no business experience, but if you decide to go ahead anyway, learning from other people’s mistakes will stand you in good stead.
Most people have thought about starting their own business. The desire to be your own boss is something most of us share. But small business is a risky business. According to research about 50 percent of all small businesses will fail within five years.
Here are five mistakes to avoid:
Misjudging the demand for your product or service.
This is a common mistake. Make sure that you don’t overestimate demand. Do your homework on whether most people need or want your service or product. Test demand on friends and family and ask them to be brutally honest with you.
Not having a unique edge over the competition.
Your business has to stand out from the competition. You may believe that you are better than others at what you do, but that is not enough. You have to consider factors like price, taste, decor, quick service and marketing to define what sets you apart.
Inaccuracy around costs.
Costs to consider before you start should include your living expenses. Under-financing is one of the most common reasons for businesses to fail. Assume costs will be higher and it will take longer than you thought. It’s better to overestimate the costs and be covered for unexpected eventualities than to have unrealistic expectations and lose everything.
Not delegating and not paying attention to critical functions.
You can’t be good at everything. Identify each critical function and get the best person for the job. Use your strengths to benefit the company and delegate functions that others can perform better. There are many critical functions involved in running a successful business. Get the right people on your team and be sure each one is in the right position.
Not planning for profitability.
Define your business model and know your profit model inside out. What is your gross margin on sales? What is your net margin? How many sales do you need to break even each day or week? Establish the key performance indicators (KPIs) for your business that will let you know how your company is doing. If the numbers show you are in trouble, take action and make changes before it’s too late. You can only do that if you define and measure your numbers.
