Starting a business is hard. Even the smallest mistake can be devastating to your company, and it will take time to recover. The first year of running your own company is difficult enough without making unnecessary mistakes that could have been avoided with a little preparation.
Thankfully, these are all things that you can prepare for in advance so as not to fall into their trap. The trick is knowing what those pitfalls are and how to avoid them when starting a business or any new venture. Here are some common pitfalls to avoid when starting a business.
Neglecting To Make A Business Plan
Before you do any marketing or sales, before you hire your first employee, before you spend a single dollar of any capital you have to have a business plan.
The business plan is the blueprint for your company it’s the foundation of everything you do. Without a business plan, it’s impossible to make good decisions.
Without a business plan, it’s impossible to raise outside capital. It’s impossible to get bank loans or venture capital if you can’t show how your business will make money.
It’s impossible to hire employees because you have no idea what their job description is or what their salary should be. It’s impossible to sell your company one day. If you ever want to do anything with your business — you have to have a business plan.
Not Enough Startup Funding
If you start your business with low startup capital, you will be at a huge disadvantage with your competitors who have more funds to spend.
If you are short on cash, start small and plan to grow into a bigger operation. Don’t start out with unrealistically high expectations.
You can always expand your operations later, but starting out with too big of a scope can be crippling. You will find yourself strapped for cash and unable to sustain your business like you want to.
This can lead to desperation, which can then lead to questionable business decisions. Starting your business with the right amount of cash is key.
If you are well funded, you will have the resources to hire the best people and make the right investments to ensure your company’s success. Starting out with too much cash, though, can be just as damaging. Too much cash can cause you to get lazy and make unwise decisions.
It can lead to hiring people with the wrong skill sets just because you have the money to pay them. It can lead to making bad investments. So, again, make sure you have the right amount of funding for your startup.
Failing To Set Goals
One of the biggest mistakes you can make when starting a business is failing to set goals. You need to know where you want to be one year, five years, and ten years from now.
You need to know how much you want to make, what your expenses are, how many employees you want to have, and how much you want your company to be worth.
You need to know what your ideal customer is. You need to know where your industry is headed. You need to know all of these things if you want to succeed.
If you don’t know where you want to be, how will you ever get there? When setting goals, you need to make sure that they are SMART goals. They must be specific, measurable, achievable, relevant, and timely. If your goal is to “make a lot of money”, that’s not good enough.
You need to know how much money you want to make, over what period of time, and how you are going to make it happen. If you don’t set goals for yourself, you’ll never accomplish anything.
Being disorganized can lead to disastrous consequences for your business. Not only can it cost you time and money, but it can cost you clients and money, too.
You need to be organized in order to be successful. You need to know where all your company’s documents are. You need to be able to find what you’re looking for when you need it.
You need your employees to know where things are and how they should be handled. You need a filing system that you follow and that everyone else in your company follows, too.
You should be using software to manage your business. You should be using a CRM, an accounting software, and a project management software to stay on top of all the details. You should always be thinking about how you can become more organized.
Not Getting The Right Insurance
One of the worst things that can happen to your business is a lawsuit. It can be devastating to your finances and your reputation. Unfortunately, lawsuits happen all the time.
It could be a customer who complains that your product doesn’t work, a worker who gets hurt on the job, or a supplier who claims you didn’t pay them the money you owe them.
You need to be prepared for any of these scenarios. You need insurance. You need to make sure that your business has the right insurance policies.
The best way to do this is to hire a insurance agent to help you find the right policies for your company. Hiring a professional to help you find the right insurance policies can save you money and keep you protected.
Lack Of Market Understanding
Before you start planning your new business, you need to make sure that there is a demand for what it is that you are planning on selling. This is a critical step in the process that many entrepreneurs overlook.
You need to understand the size of the market, who your potential customers are, what problem you are solving for them, and how much they are willing to pay for your product or service.
If you miss any of these factors, then your new business won’t last long. This is especially true if you are entering a market that is already saturated.
Meaning there are already many competitors in the market. If you don’t have a solid understanding of the market, you are setting yourself up for failure.
Trying To Handle Everything Alone
No matter how great your skills are, you will need to hire and manage other people to help you launch and manage your business. If you try to handle everything by yourself, you are setting yourself up for failure.
Even if you are skilled in many areas, you can’t do everything by yourself. This will take a lot of time away from your actual job, and it will give you a false sense of security that you know what you are doing.
Instead, you will end up spending a lot of time training other people that you hire to do the work. This is not only distracting, but it will slow down the entire process.
Hiring skilled people with the right personality is a lot of work on its own, but it is well worth it in the end.
Ignoring Customer Service
As you are getting your business off the ground, you will probably be receiving lots of customer service inquiries. It is tempting to ignore these people, either because you are incredibly busy or because you think that it is unimportant work.
Customer service is just as important as any other part of your business. You need to reply to every single email or phone call that comes through, and you need to do it promptly.
The first interaction people have with your company is usually a good indication of the quality of service they will receive from you.
If you ignore emails, don’t pick up the phone when it rings, or take a long time to respond to people, they are going to be turned off by your poor customer service. This will impact how much business you can do, and it will make it harder for you to grow your company.
Ignoring The Competition
Even if your product or service is unique, there are probably other companies that are selling similar things. Although you don’t want to obsess over your competition, ignoring their existence is silly.
You need to know who they are, what they are doing, what they are selling, and how they are different from you are. This will give you an advantage over your competition.
For example, if you know that one company is offering a similar product to yours but at a higher price, you can lower your price to make your product more appealing.
If you know that you are more efficient or effective than other companies in your industry, you can use that to your own advantage as well. If you ignore your competition, you are doing yourself a disservice.
Starting a new business can be difficult, and it may not succeed even if you do everything correctly. However, these five tips will help you increase your chances of success.
Make sure that you understand the market you are entering, hire quality people, provide excellent customer service, and be cognizant of your competition. If you do these things, you are more likely to succeed in starting your own business.