Statistics indicate that at least 22.5% of new ventures fail in the first year. 30% close by the second year, while 50% don’t last beyond their fifth year. Even if businesses do survive, 70% don’t make it beyond their tenth year.
If you’re a small business owner doing the research before starting your company, know that these numbers aren’t mentioned to discourage or deter you. The objective here is to guide you through the most common pitfalls that entrepreneurs face and demonstrate how you can avoid them to ensure the long-term success of your enterprise.
Did you notice an interesting phenomenon? The statistics above showed that businesses have a higher likelihood of failing as they grow older. You would have thought that startups learn as they go along. It stands to reason that the more time you spend in an industry, the higher your chance of survival should be. Surprisingly, that’s not true.
Let’s take a closer look at the mistakes that small business owners are likely to make. What can you do differently? How would you make the list of the 582 million entrepreneurs across the world who have been highly successful in establishing their companies?
1. Not Getting the Business Registered
Once you’ve developed this amazing business concept, one of the first things on your list is to contact a lawyer. Find out everything you can about the legal nuances of starting a new venture. Many state regulations require you to secure a license and register the business. Also, gather information about the right business entity you should institute.
Registering for a limited liability corporation or LLC ensures that you won’t be held liable in case the business incurs heavy losses or is involved in a lawsuit. You’ll also legally protect intangible assets like intellectual property, trademarks, trade secrets, and copyrights.
Planning for and working out how to sell your company years down the line is essential at this stage. Experts recommend that you work out your exit strategy at the onset.
2. Not Having a Detailed Business Plan in Place
Take your time as you create a detailed business plan and establish contingencies for any pitfalls. A smart small business owner should have an overview of the estimated operating costs, the finances and investment needed, and how to market the products and services.
Your business plan should also include researching the viability of the product, its market potential, and its target audience. Even if you put together a one-page plan, it’s a good starting point that can develop into a working strategy. Take a CFP practice test that trains you in the rudiments of financing.
3. Not Projecting the Purpose of the Product or Service
Just having a brilliant product or service concept is not enough. Many small business owners are entirely focused on talking about how awesome their product is. They’ll talk at length about the benefits and design a website around its features.
But, the first question potential customers will have is–what does your product do? The mission and purpose should be crystal clear within the first few seconds of introducing the business concept. Remember, that short time frame is the window in which you have the chance to make an impression. You need to answer the right questions to convince readers that they need to invest in what you have to offer.
In addition to sharing why customers should buy your product, you’ll also need to explain why they should choose to spend on your brand rather than a competitor. Even if your idea is unique and one-of-a-kind, the industry might have alternatives that work better than the concept you’re offering. And, that’s where effective advertising comes in.
4. Not Having an Effective Marketing Strategy
The smartest of business ideas are not going to work if potential buyers don’t know they exist. When you’re trying to establish a new business, it is understandable that you’re working on a shoestring budget. The one thing that you can’t compromise on is advertising.
Work with professionally trained experts if you have to, but devise a marketing plan that delivers a robust and consistent message about your product and the value it provides. You’ll also need assistance in targeting the relevant audience that is most likely to make a purchase.
Study the potential market complete with variables like age demographics, geographical factors, profession, faith, and interests, for starters. Or, focus on the USP like, for instance, economical price points, higher quality, or a previously-unaddressed need in the market.
5. Not Having an Operational Structure
Running a company has many facets ranging from production, designing, billing, collecting payments, administration, maintaining records and payroll, and various others. As a small business owner, you’ll display strong leadership qualities and run a tight ship.
You’ll hire trained personnel and create strict schedules for each operation and ensure that all systems are managed efficiently. Hold employees accountable, and institute a company culture where all deliveries are made on time. You’ll also want to deal with financial matters regularly and attend to customer complaints, concerns, and queries.
Conduct team meetings regularly to connect with your people, touch base, and clarify the path you wish to take. Be transparent about setbacks and the steps you’re taking to resolve the issues. Without a strong operational structure, you might just find that the confusion and chaos make it impossible to conduct day-to-day operations.
6. Losing Sight of the Startup’s Key Objectives
Every entrepreneur who develops a business concept has some skill, ability, or a unique talent that they want to convert into a company. For instance, a talented beauty therapist may want to start a salon where they can focus on cutting hair full time or performing skin treatments. Or a lawyer specializing in marriage counseling may want to spend more time helping people resolve their relationships.
Even as you start up and run the business, it is important not to lose sight of the prime objective that spurred you on the path of entrepreneurship. Hire people to take care of the other administerial, financial, and maintenance tasks, leaving you free to do what you do best.
If you’re too bogged down with additional tasks, you might start to get frustrated with not having enough time to devote to your passion. Once that starts to happen, the business is sure to go downhill. Stay on track doing what you set out to do and bring in trained people to manage the other aspects of the business.
Learn from What Other Entrepreneurs Are Doing Wrong–And What They’re Doing Right!
Developing a new business idea and giving it shape and structure takes time and effort. Expect that you’ll invest double than what you initially estimated and it will take you twice the anticipated time to get the sales figures and results you hoped for.
But, as long as you can avoid these key mistakes that most small business owners make, you’ll have a higher chance of making a success of the venture.
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