Starting a small business is not for the faint of heart.
Entrepreneurship has been on the upswing since the start of the pandemic. According to the U.S. Census Bureau, just under 5 million new businesses were launched between January 2021 and November 2021—an increase of 55% compared to the same period in 2019. Not only that but most of these new companies are being launched by first-time entrepreneurs. A recent survey released by Digital.com reveals that 32% of Americans planning to start a business this year have never launched one previously.
According to Digital.com’s small business expert, Dennis Consorte, now more than ever, it’s a good time to consider starting a business. “One of the drivers for The Great Resignation is that people want to feel a sense of purpose. Business ownership can give you the flexibility to pursue what matters to you in a way you believe will be most meaningful and impactful,” Consorte says. But the thought of starting a small business can be scary, especially for a newcomer.
That’s why it is critical to begin the process well-informed with a thorough understanding of the common pitfalls to steer clear of. So let's start by examining the most common small business mistakes and how to avoid them.
Casting too wide a net
Many first-time small business owners fear not having a large enough audience to market their product or service to. Instead, it is critical to define your niche or area of specialization. If you try to sell your product to everyone under the sun, it will be expensive and impossible. It’s much easier to specialize. The narrower your market, the better your chances of reaching the people you want to serve through specific channels. Do market research to identify your target market, where you can find them and how they will react to your marketing efforts. Then you can market yourself as an expert while showcasing your product or service to the narrow market that can benefit most.
Trying to do everything yourself
If you are a micromanager or a perfectionist, then take note. The greatest mistake entrepreneurs make is to believe they can do it all by themselves. Starting a business could initially mean handling many tasks on your own. But eventually, you must learn to delegate and hire people that will help you grow the business. Like anyone, you have strengths and weaknesses. As a small business owner, it is up to you to leverage your strengths and surround yourself with people who can supplement your weak areas.
Being irresponsible with cash flow
According to one report, 38% of businesses fail because they run out of cash. All companies are dependent on cash flow. But managing money is not a skill that all small business owners have. Some entrepreneurs are visionaries, while others are more focused on business growth. If you want your business to become profitable, keep your eye on the bottom line. Every dollar you spend is ultimately taken away from your profit margin. To shield your business from cash-flow issues, maintain an account balance equal to at least three to six months of operating expenses. That way, even if you experience unexpected cash flow issues, you have reserves in place to protect yourself.
Launching without a plan
It is always a good idea to start with a business plan, even an informal document. Launching a business without a plan is like setting out on a 50-mile hike in the wilderness without a GPS. Eventually, you will lose your way and may not find a way out. While some argue that business plans are unnecessary, one study found that entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs. According to Deacon Hayes, financial expert and founder of WellKeptWallet.com, "Too many businesses start without a basic plan, and if you fail to plan, you are essentially planning to fail. A startup should map out a business plan, even if it is just one page. It should include how much it costs to operate, how much they anticipate selling, who would buy their product and why."
Refusing to pivot
It is essential to review and refresh your business plan continually. Because at some point, you may decide to pivot your business in a new direction. Some reasons include adapting to changes in the economy, selling to the wrong target audience, or keeping up with the competition. You may also want to experiment with different pricing strategies, streamline processes or add a new product or service. Whatever the case, pivoting successfully in business is a valuable survival skill.
Starting a small business is not for the faint of heart. But it can also be one of the most rewarding journeys you can embark on. Don’t let your fears prevent you from taking that first step. Just remember to start small but dream big.
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