By Susan Solovic
It has been said that “small opportunities are the beginning of great enterprises.” That is certainly true for the more than 29 million small business owners in the United States. But the birth of a new enterprise is often fraught with challenges and pitfalls. Each year there are about half a million business start-ups, but during the same time, there are slightly more business failures.
Why do businesses fail? The reasons are varied, but there are a number of common mistakes which can prevent you from reaching your business objectives.
1. Not having the right stuff. Many individuals dream about being their own boss. However, owning a business is not for everyone. People who start businesses from scratch are risk-takers. They are comfortable with the idea of being totally responsible for their own destiny. After all, when you are in business for yourself and something goes wrong, there is no one to blame but you. And conversely, when there is success, then you get to take all the credit.
You need to assess your personality type. Are you comfortable working alone? Are you a self-starter? Are you comfortable wearing multiple hats? Remember, as the business owner you are the lead salesperson, janitor, bookkeeper and receptionist as well as being responsible for delivering the product or service. Not everyone has the right stuff to go solo and be their own boss. Read more about how personality can affect your business.
2. Not understanding the difference between a job and a business. Successful entrepreneurs have a clear vision of what it takes to succeed. Too often people make the mistake of jumping into business ownership without understanding basic business concepts. They are experts at delivering a specific product or service, but when it comes to running a business, they are clueless.
There is a big difference in creating a job for yourself and starting a small business. A business is something that becomes bigger than you. It grows into its own being and can sustain itself without you doing all the work 24/7. So to be successful, get started on the right foot and make sure you learn the basic elements needed to build a successful business.
3. Not understanding the market and industry. Does the world really need a better mousetrap? You may think you have the greatest idea for a new product or service to offer, but if no one is interested in buying it, then you are out of business before you open the doors. Researching and understanding your market is an important and necessary first step. You should be able to: quantify the size of the market; articulate who your customer is; know who your competition is; determine how you will price your product; and understand what your marketing strategy will be.
4. Underestimating time and costs. When you start a business it’s important to analyze the market and make financial projections. You should have a good idea of what your start-up costs will be and how long it will take you to become profitable. Most start-ups significantly underestimate their start-up costs, no matter how carefully they plan. This can be a fateful problem if you get started with the mindset that you’re adequately funded, then find yourself under-financed down the road.
5. Seeking confirmation, not the truth. The last thing you want when starting a new business venture is to surround yourself with a bunch of “yes” people. Entrepreneurs are committed to their vision and they believe strongly they can succeed. Sometimes they’re so headstrong they ignore any advice counter to their ideas. You need to be able to listen to and encourage feedback pointing out weaknesses in your business strategy.
6. Failing to have a solid business plan. This may be the most common mistake of all. Too many entrepreneurs jump into business ownership without a solid business plan. As a result they don’t have a strategic direction or a way to measure their success. You should set clear objectives for your business and remain focused on those objectives. There is an old saying: "Failing to plan is planning to fail". When it comes to business ownership, no truer words were ever spoken.
7. Losing focus. Starting and growing a small business takes time. You don’t put out your “Open for Business” sign and suddenly get flooded with business. Times will be lean and tough in the beginning. So it’s tempting to try to be too many things to too many people, and as a result you lose focus, which can cause you to lose your business. Define your product or service and stick to your knitting.
Don’t let your new business venture become a statistic. Take time to lay a strong foundation by understanding what the business needs to succeed. While there are never any guarantees, taking the right steps in the beginning enhances your chances for success.
Susan Solovic, The Small Business Expert is an award-winning entrepreneur, an attorney, a New York Times best-selling author, a media personality and a highly sought after keynote speaker.
The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank or its affiliates.