10 common small business startup mistakes

Not writing a business plan

Writing a business plan is an important part of creating a sustainable business and standing out from the competition. A strategic business plan creates momentum, which means that because you have a clear and researched idea, you are inspired to succeed.

But many new entrepreneurs begin their venture without thinking about the big picture. They then have no understanding of the market, financials, business model, or logistics, and that lack of understanding can cost time, money, and effort when things go wrong. They also don’t have a mission statement to stand by when things get tough.

Avoid this common mistake by creating a business plan to help identify the unknowns and spot the gaps you need to fill. Do you need to work with a 3PL or ship manually? How will you manufacture products? Who are you selling to?

Every product you create should relate back to your business plan. This helps you stay on track to meet your business’ needs and goals—and build one that doesn’t fail. Not sure where to start? Use our free business plan template to guide you.

Free: Business Plan Template

Business planning is often used to secure funding, but plenty of business owners find writing a plan valuable, even if they never work with an investor. That’s why we put together a free business plan template to help you get started.

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Not focusing on cash flow and profits

If you ask any seasoned entrepreneur what the most important skill in running a business is, they’ll say it’s math. Many of them start their business as a hobby and don’t pay as much attention to the numbers as they should.

And there are a lot of expenses to account for. According to our research, small businesses spend an average of $40,000 in their first full year of business. This is spent on the following things:

Let’s break down the profit formula above. Assume there are 20,000 people searching for your product online per month. If you can put yourself in front of even half of those people, that’s 10,000 potential buyers.

If you convert at the average of between 1% and 2%, that’s 100–200 sales. If your average order value is $100 and you have a net profit margin of 30%, your profit will be anything between $3,000 and $6,000 per month.

Of course, these are really rough estimates. But whatever you get into, if you’ve done the math, you know what you’re in for. Avoid this common mistake by keeping track of your potential profits and cash flow using the above formula. Resources:

Not assessing your business idea

One of the biggest mistakes you can make when starting a new business is not doing market research. You want to learn about the competition and understand how you can differentiate yourself from them. Competition can be other small businesses carrying the same products as you, or it can be market giants like Amazon and Walmart.

Sometimes entrepreneurs dive into a niche market without determining if it’s a good fit or not. There are cases where a niche has low demand and too much established competition. If that’s the case, you may not want to build a business around it.

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Spreading yourself thin with products

A big mistake new business owners make is selling too many products. Sometimes if one product doesn’t sell well, owners will add more products to their store to attract potential customers. This doesn’t always help.

Say you have a store that sells eco-friendly recyclable bags, but no one buys them. So you add more eco-friendly products from your supplier. Eventually, you have a whole medley of products with no relation between them besides being eco-friendly.

7 mistakes to avoid when starting a business

Starting a business means taking a step into the unknown. There is a seemingly endless checklist of things you have to do in order to begin– and all of the steps might be overwhelming. It can be easy to get lost along the way.

Not all businesses survive– and what you do and do not do during your start-up stage can define your company for years to come. Ensuring that you tread carefully during the beginning stages of your business is the key to success once you establish your business more firmly.

Instead of looking at all the “to-dos” that a start-up needs to consider, let’s take a step back and consider the major mishaps that you can prevent in order to find success with your start-up. To keep you on the right path, here are seven major mistakes you need to avoid making while starting your business.

You can have a very brilliant business idea but without a good business plan with activated business value, that idea is as good as dead. A business plan acts as a guide as your idea slowly becomes a reality. It helps you plan out the direction you want to go in, and when unexpected road blocks come up, it’s a great source to return to remind yourself of your goals and trajectory.

A good business plan requires a lot of research and can be time-consuming. However, not taking the time to create a business plan can spell disaster for you in the future. While writing your plan, consider the basics of your business: What industry are you in? What is your budget? Where are your customers? How will you turn a profit?

A lot of people try to begin their business without conducting proper market research. The holes you see in a market in your specific location might not hold true across the board– so, conducting research enables you to get a clear view of the state of the market you want to operate in.

Don’t let the prospect of market research overwhelm you. If you do not have the resources to conduct your own market research, in many cases there is plenty of secondary research, also called desk research, that you can draw from. This is research that has already been conducted and can be found in various business journals or library databases, depending on your industry. Market research includes knowing your competitors, the price and quality of the products you want to offer, and customer behavior. It is also very important to test your products and services before starting up a business.

How you deal with competition is important– you can’t let it overwhelm you, however you can’t completely ignore it, either. It’s important to look at your competitors head-on. Do not start a business in an already saturated environment. Look for something else to offer, or simply go to another location.

Finding your competitive advantage and your USP, or unique selling point, is an important step in facing your competition. It’s important to center your product and associated marketing not just around the features your product has, but also around specific benefits your product has that others in the market do not.

Ensure that you don’t lose the forest for the trees– always endeavor to think of your bigger picture, and stay focused on where you’re headed. Don’t become distracted, or else your business will suffer.

Combating distraction isn’t easy– especially when there are so many vital components to juggle when you begin a business. To help manage your focus and progress, you can employ an agile goal-setting methodology. While there are plenty of useful methodologies out there, OKRs– or, Objectives and Key Results— is a framework for setting and tracking goals that has helped both industry leaders and start-ups find success.Lack of Adequate Capital

Not every business makes money right away. In fact, 95 percent of businesses do not make money when they first start out, and a good number of them take years before they start making any money. This means that you need to ensure you have adequate capital available to sustain the business until it makes money on its own.

This money might come from investors, seed money, or your own personal savings. It’s important to keep an eye on how much you’re spending, how much you’re bringing in, and noting that just because you are making sales, it doesn’t mean you are turning a profit.

No one will know what you are offering unless you tell them. Effective marketing plays a pivotal role in ensuring that customers come to your business. Potential customers will only know of your location and what you offer through effective marketing. Therefore, do not be afraid to invest in an effective marketing campaign.

Regardless of your budget and reach, it’s important to stick to the four main pillars of marketing: promotion, product, place, and price. Promotion involves your advertisements in all mediums, as well as public relations. Product refers to the item you are selling or service you are offering. Ensuring it is of the highest quality possible is part of your marketing strategy. The third pillar, place, indicates your target audience and customer base. Ensuring you’re bringing your promotional material to the right place so the right people will see it is half the battle. And finally, price is the fourth pillar. This number is quantified based on your target audience, competition, production costs, and the quality of your product. Hiring Too Soon

Final thoughts

When preparing to start a business, there is no end to the perspectives you have to consider to truly feel like you have your feet on you. Chances are, your business plan will get off course, issues will pop up, and the progression you imagined will not proceed as planned. Despite this uncertainty and the inevitability of the unexpected, you still need to prepare as best you can.

It is essential to consider the above factors. When you fail to address these issues, your business might experience challenges you cannot handle, and you run the risk of closing down. Ensure that you do everything you can to prevent these mistakes. Take the time before launching your start-up to put in the proper research and thought into your idea. That way, your energy and passion can feed into driving progress and making your business and your product better, rather than into putting out fires along the way.

Customers

Marginal Niche or No Targeted Customers

For instance, you went to Canada for vacations and loved ice-skating. On your return you come up with a great idea for durable ice-skaters. But the question is how many people would be interested in buying ice-skating gear in a tropical country like Singapore? Worse still, you don’t even do basic research on potential customers and invest all your savings in making the ice-skating products. The business was bound to fail even before it was conceptualised.

Tip 4: Don’t scale too fast.

Don’t even think about scaling up before you have achieved product-market fit, or solved the teetering problems. “Growth hacking” is mandatory nowadays, but to do that for a product that isn’t quite ready for bigger scale, can do serious damage to your brand-building in nascent stages. Scaling up should be a iterative process. Do it only when your product has achieved its product-market fit.

How to Avoid the Above Mentioned Mistakes, you ask?

• Are there any business risks associated with this start-up?
• Does the product have clearly defined applications and a definable market or target customers?
• How much finances are needed and how to raise it?
• What will be the initial valuation of the company and will private investments be needed for future growth?
• Who will own the intellectual property (IP) rights, if any, of the product?
• When will the first product be launched? How to scale-up henceforth?
• What will be the roles and responsibility of founder(s) in the existing set-up, as well as in the long run?
• What will be the future of the start-up? Whether it will be a small yet sustainable business, grow as a private company, or position itself for acquisition? Going public is also always an option?

Sources:

https://www.shopify.com/blog/business-mistakes
https://www.profit.co/blog/the-alphabet-p/promotion/7-mistakes-to-avoid-when-starting-a-business/
https://www.singaporecompanyincorporation.sg/blog/common-mistakes-to-avoid-while-incorporating-a-start-up-in-singapore/