As a business owner, avoiding common startup mistakes can help increase your odds for success. You’ll make wiser decisions about operations, hiring and finance. In addition, you’ll have a more rewarding experience, which can reflect throughout your organization. Positive, forward-thinking leadership can increase the likelihood of strong growth.
In the excitement of starting a new venture, it’s easy to lose sight of common-sense practices. Here are five business mistakes to avoid when starting a business.
It’s easy for entrepreneurs to become enamored with their business idea. But allowing that love for your product or service to turn into overconfidence can leave you unprepared for challenges ahead. It’s one reason why businesses fail and why business owners need to coolly evaluate their organizations.
Setbacks are natural, especially as you're learning the ropes of running a new business. Success may not happen right away, and you may have to invest more time than you initially planned to. You may have to delegate more than you're comfortable with. Maintain your optimism, but remember that it's important to plan responses for different situations that may arise.
Make a plan
Creating a business plan with thorough market research and analysis can give you a clearer idea of the true potential of your business.
As part of your business plan, perform a SWOT analysis. "SWOT" stands for strengths, weaknesses, opportunities and threats. A SWOT analysis can help you identify factors within the business and outside its control that may affect its future performance and ability to remain competitive. During a SWOT analysis, you'll look at:
- Strengths: internal factors that help the business do well and achieve its goals, such as staff members' unique skills, specialized knowledge and industry experience
- Weaknesses: internal factors that may put a damper on progress, such as areas that aren't profitable or where more industry experience is needed from employees
- Opportunities: external factors that the business can take advantage of to succeed, such as ways to meet clients' needs, new target audiences and the development of new products or services that could help the company further its mission
- Threats: external factors that could harm the company's performance, such as areas where competitors are successful and any current economic conditions that make doing business difficult
You'll use the information and data gathered during the SWOT analysis to create plans that utilize the company's strengths to eliminate its weaknesses.
Too little marketing
Another entrepreneur mistake is to believe the awesomeness of your product alone is enough to attract business. But while quality is important, it doesn't guarantee customers will come. You’ll need to skillfully market your product.
The early stages of a company often require that a higher percentage of your operating budget be devoted to marketing and advertising. If you take your focus off marketing before building up a solid customer base, your business may never establish a foothold.
Risking family assets
It may be tempting to clean out your savings and retirement accounts to fund a startup. But this mistake can leave your startup without capital you may need later in your venture. At the same time, it could put you and your family at serious financial risk, with long-lasting consequences.
Raising startup funds from outside investors can count as a vote of confidence in the strength of your business proposal. Consider it your first successful sale. Before lending you money, bank managers or venture capitalists will require a well-researched plan and ask incisive questions on your business. Going through this process can help you focus your vision and prepare you for many contingencies.
Underestimating your time
A new business often requires a significant amount of time from its owners to establish operations and revenue streams. That may mean working on weekends and late into the evening. Many business owners underestimate this commitment.
Also, it’s not uncommon to misjudge the lead time for opening your business and getting to a breakeven point. Hitting a snag on a crucial aspect of your startup can lead to delays. Failing to account for such scenarios may cause you to spend more startup capital than you planned, leaving you short of funds before you can get your business off the ground.
Overestimating your abilities
One reason why businesses fail is believing a valuable skill will automatically translate into business success. But being an experienced chef doesn't always translate to running a successful restaurant or catering company. Running a business requires a variety of skills. To avoid this common startup mistake, learn the skills needed for business ownership, or take on a partner or business manager who can complement your talents.
There are many methods businesses use to achieve success. Do your best to discover what works for your company's needs, and protect your business from unforeseen events with commercial insurance from Nationwide.