Everyone makes mistakes. For businesses, mistakes can be the deciding factor for staying in business or closing their doors forever. Many novice small business owners make the same mistakes within the first year of opening their business that causes them to have to close down. Find the top five mistakes and what you can do to prevent them below.
Mistake #1) Putting Your Heart & Soul Into Your Business, But NOT Your Head
It takes great deal of passion to start a small business. In fact, many small businesses are a result of a passionate idea or organization. It is important to have the strong feeling to get the business off the ground. Unfortunately, that is not enough. As much passion and drive you have for your business, it is important to also think about other factors for your business, especially your finances. Passion doesn’t pay the bills. You need to have a plan from the get-go to be able to determine if you business is simply a passion-driven idea, or something that is lucrative and will be able to keep its doors open. Talk to a business consultant, Chamber of Commerce, or network with other small business owners to have a resource and guidance for starting up a small business. Your heart and head need to work together.
Mistake #2) Inaccurate Financial Planning
It is every new business owner’s dream to have the cash flowing as soon as you open the doors. Reality is, that doesn’t always happen. Cash flow is essential to having a successful business, and it starts from when you start the process of opening your business. Aside from the start up costs of finding a building, purchasing or manufacturing products, and hiring employees, you need to keep in mind that there are other factors in determining costs and cash flow. One of the most important aspects of planning for your business financially is building a customer base. Without one, you will have no incoming cash flow or profit, and more than likely will have to close your doors. Building a customer base is not an easy task and takes time and energy. Experts suggest having at least six months of cash saved on reserve in case of hardship for your business. It is better to plan ahead for problems and have money saved in the back in case of emergency. Lack of plans could lead to the lack of your business.
Mistake #3) Going into Business Blind
So, you have an idea for your business, a great idea in fact, money for start up, and money set aside for hardship. If you think you’re good to go, think again. One of the biggest mistakes new small businesses make is going into business without knowledge of your market. It is vital to do simple market research. Before choosing a location for your business, you should do some investigating. Find out about the community where you want to start your business: trends, socioeconomic information, demographics, and most importantly, where your competition is. Remember, pricing and product placement is important. Once you find the area you want to set up camp, delve deeper into the community. Start attending Chamber of Commerce meetings. Get to know other local small business owners to network. Infiltrate yourself into the community in a positive manner.
Mistake #4) Not Knowing Your Business
You NEED to know your business. This is more than just phone number, address, and other contact information. Your "elevator pitch," a two minute summary and attention grabber about your business to a potential customer, is important to have. It is not necessary to memorize your elevator pitch, but you should know it well enough to be able to tell others at a moment's notice. Business cards are important to have on you at all times when opening a new business. Also, think ahead of possible questions that people might ask you. Know the answers to those questions. Your business' history is equally as important. Remember that you got into your business and opened it for a reason. Channel your passion for your business when talking about your business. Don't lose sight of what moves you.
Mistake #5) Not Assuming the Role of Small Business Owner
Having a job is one thing, and owning a small business is completely different. Owning a small business is more than a job. You need a completely different set of skills to own and run your own business than you need to perform well at a job. First and foremost, you need an entrepreneurial heart, goals, and the ability to dream big. Unfortunately, it doesn't end there. There are many technical aspects that small business owners need to know, including how to keep finances, legal issues, and employment issues. You can learn these entrepreneurial skills by networking with other small business owners, reading entrepreneurial based books, or talking to small business counselors.
Using your heart and your head are important when opening a small business. You need the passion to keep your business going, especially during the rough times. You need a business mind and entrepreneurial skills to keep your business open. Many small businesses fail within the first year, most of which because they make one of these five mistakes. Take measures to prepare for these mistakes in advance, and avoid them at all costs.