The vast majority (99.9%) of businesses in the United States are considered small businesses. Half of them are home-based firms, and one-fifth are family-owned businesses, but as a whole, small businesses make up a significant portion of our economy—65% of all new jobs since 2000 have come from small businesses.
Despite their importance, running the day-to-day of a small business isn’t easy, and most founders struggle to turn their dreams of success into reality. Only half of small businesses survive until their fifth birthday, and only a third are still around after 10 years. With such short lifetimes, how do you keep your business from turning into a statistic?
7 Mistakes To Avoid As A Small-Business Owner
There’s no foolproof way to guarantee success—even in the best business environment. There’s an element of luck involved, of course, but there are also some mistakes that can increase your chances of failure.
- Failing To Create A Well-Thought-Out Business Plan
Most small-business owners are idea people—they’ve identified a need in the market and decided to fill it. However, an idea is not the same as a process, and running and growing a business is a very involved process. If you don’t have a plan in place from the beginning, you’re making it much harder to succeed.
A business plan is a list of milestones you want to meet and concrete steps you’ll take to achieve them. There are many free templates online that you can use to get started, but you can also craft one of your own if you feel it would better suit your business.
Creating a business plan isn’t just about keeping yourself organized. You’ll need one if you want to apply for a small-business loan or find investors.
Business plans aren’t static, either. It’s a guide, and you may change it over time. If you make any changes, make sure they’re well considered with your end goal always placed at the forefront.
- Hiring The Wrong People
As you grow your business, you’ll eventually need to hire some employees. While it might be easy to pick the first applications that come across your plate, it’s important to look for people who you can see serving in management or supervisor roles going forward.
Once your business has a few key employees, you can start looking for people with more specialized skill sets and continue growing your team.
- Unrealistic Financial Forecasts
When you work on your financial plans, try to create realistic forecasts for your future financial circumstances. These forecasts should be conservative and assume a minimal level of growth. If you count on unrealistic growth levels, your expenses can exceed your income, and you could find yourself in debt.
Sometimes, it’s necessary and beneficial to take out a short-term business loan. However, you should remember that every loan needs to be repaid with interest—an added cost you’ll never get back. If you take out a loan, consider paying it off as quickly as possible to avoid paying more interest than you have to.
- Improperly Defining Your Target Audience
If you’re a small-business owner, you’re probably a solutions-oriented person and have a deep well of knowledge in your area of expertise. While this knowledge helps in many aspects of running your business, it can also make it easy to lose track of what the average customer wants.
You must understand your customer base to serve them adequately and win business. Without keeping in mind your target audience, you could risk releasing a product for an audience that may not actually want or need that product.
- Trying To Do Everything By Yourself
As your business grows, you won’t be able to do everything yourself. You’ll need to hire employees and delegate tasks at some point, especially if your business is growing quickly.
This is where having a solid team behind you is most important. Putting every responsibility on yourself will only slow things down and make it harder to accomplish your tasks.
- Neglecting Your Customer’s Opinions
Your customers are the most important part of your success. They’re more important than your product, vision or work ethic. It doesn’t matter how good you think your product or service is—if your customers aren’t happy, you will not be successful.
Take the time to listen and respond to your customers, even when they’re not easy to deal with. You can learn something valuable, even from the most challenging customers, and use their feedback to finely tune your operation to best suit their needs.
- Trying To Expand Too Quickly
Making your first sale or landing your first client can be incredibly rewarding, and it feels like your dream will finally come true. There’s nothing wrong with getting excited, but try to temper your expectations.
The strategies that have worked so far might not work in the future. The economy could enter a downturn that causes your customer base to shrink, or you could lose access to a supplier that allows you to sell products at competitive prices. In either case, a rapid business expansion might leave you financially constricted if something goes wrong.
Slow, steady growth can be frustrating, but it’s the best path to success.
The Bottom Line
Building a business is hard work, and success is never guaranteed, but you can increase your likelihood of success by avoiding common business mistakes. By listening to your customers, hiring the right people, and focusing on slow and steady growth, you can set your business up for success from day one.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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