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Updated September 20, 2023
Subtitle
Common blunders that will hurt a small business’s long-term success
Synopsis
What are some of the common mistakes small businesses make when starting? Here is a list of what I believe are common mistakes that should be avoided to help ensure your small business’s long-term success.
What You Will Learn
1. You will learn ten of small businesses’ most common mistakes.
2. You will learn how crucial a one-page business plan is to your success.
3. You will learn the fundamentals of money management for a small business.
Introduction
Although mistakes, missteps, blunders, and lapses in judgment can all be our greatest teachers, they can be time-consuming and costly. So, what are some of the common mistakes small businesses make when starting?
I want to share some of the hard-earned insights I have gained from my mistakes in managing my small business. Here is my list of common blunders that will hurt your small business’s long-term success.
Mistake #1. Starting Without a Business Plan
If you are serious about making your new business successful, you must have a written plan. It can be as simple as one page to get started. Writing it will force you to think about how you plan to make your business come to life and become profitable.
Be realistic about the costs of running your business. Force yourself to honestly answer such questions as “Who will my customers be?”; “Why will they buy from me?”; “How much will I charge for my products and services?”; “How will I get the word out about my new business?”. Your business plan will act as an ever-changing and ever-improving guide for you to follow.
Mistake #2. Having No Management Experience
As the founder of a small business, you will be directly responsible for all aspects of management – finance, marketing, sales, employee relations, dealing with sub-contractors, bathroom cleaning, etc.
But if you are starting your business because you are great at your skill or service and want to devote all your time and energy to doing this, maybe a family member or partner can handle most of the company’s management. This person must share your vision and goals for the business.
Mistake #3. Hiring Help Too Soon
Do not hire employees until it is necessary. The expense of hiring help can financially drown your small business very quickly. When you do hire someone, make sure that they are hard-working and honest.
Only hire people you need, not people you like. Our home-based small business only hires sub-contractors we know and trust. And for some of the work, we rely on our family to do some of the smaller jobs.
Mistake #4. Not Hiring Professional Help
Do not skimp on hiring professional advisers like accountants and attorneys. Interview several and find advisers that you are comfortable talking with. Do they understand what you are trying to accomplish? Are they quick to share their experiences and knowledge with you? These professionals can save you many headaches and lots of money.
Mistake #5. Not Using the Cash Method of Accounting
Under the “cash method,” you record business income when deposited into your bank account. And you register an expense when paid out of your bank account. Most of us use this cash method because it is simpler and less time-consuming.
Under the “accrual method,” you record business income when earned without regard to when you may get paid for the product or service you sold. And you register an expense when it is incurred, without regard to when you will get around to writing a check to pay for it. This accrual method is too difficult to keep up with for a small and home-based business.
Mistake #6. Not Keeping Track of Your Money
Cash flow is the lifeblood of a small fledgling business. You must track your monthly income and expenses to know where your money is coming from and where it is going.
You can do this with inexpensive accounting software or simply download your monthly statements from your bank and credit cards and paste them into an Excel spreadsheet. Then, organize each item appropriately.
Mistake #7. Not Doing Enough Market Research
This oversight is a pervasive problem with start-up businesses. Market research can take many months and lots of research to do correctly. You must know who your competition is and who your customers will be.
You must understand all aspects of your industry – inside and out. Read all the books and articles about your type of business. Talk to others who are in that industry.
Mistake #8. Not Doing the Correct Marketing
It does not matter what business you are in. Every business must have an online presence. At the very least, you must have a company website. And doing extensive and sophisticated marketing for very little money is now possible with social media sites like Facebook, LinkedIn, YouTube, and Instagram
Mistake #9. Spending Too Much Too Soon
If you are on a tight budget, do not start by overspending on business cards and letterheads. Do not spend thousands paying a company to build your website when you can quickly build a nice one with a free service like WordPress.
And keep using that older computer until you have the cash flow and the absolute need for a new one. Get advice from your accountant before massive purchases, like a new truck or machine.
Mistake #10. Giving up Too Soon
A significant characteristic of a successful entrepreneur is stamina, drive, and determination. Not giving up your dream because of a few bumps in the road is essential for success.
Do not believe anyone who tells you that starting and managing a business is easy. It takes a serious commitment of time, effort, faith, and a clear vision. Developing the intestinal fortitude to weather the tough times is critical if you ever want to succeed.
Conclusion
Do not let the fear of making mistakes, time-consuming and costly or not, deter you from starting your new business. Your most outstanding teachers will be making mistakes, understanding why you made them, and learning how to fix and avoid them in the future.
Questions to Think About
1. Did you make significant mistakes when starting your small business?
2. Were you able to fix the problem yourself, or did you get help?
