Don’t be shy to learn about the most widespread mistakes that small business owners make when their business begins growing from the article below. It is vital that you treat business mistakes as a learning experience. Don’t forget that being aware of the mistakes other startup entrepreneurs make is useful to avoid making them in your small business.
The article below is a valuable instrument to avoid the biggest startup pitfalls.
- Most widespread mistakes first-time business owners make
- Mistake No. 1 – no business plan as a major startup trouble
- Mistake No. 2 – lack of focus on cash flows and profits
- Mistake No. 3 – launching startups in the absence of reliable market research
- Mistake No. 4 – overwhelming range of products
- Mistake No. 5 – organic marketing investments
- Mistake No. 6 – too much attention to promotions and discounts
- Mistake No. 7 – refusal of assistance
- Mistake No. 8 – not knowing your target audience
- Mistake No. 9 – absence of a strong marketing plan
- Mistake No. 10 – no intellectual property protection
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Most widespread mistakes first-time business owners make
According to the data provided by the US Bureau of Labor Statistics, the share of startups and new businesses failing within 2 years since the launch date is above 18%, while over 55% of them do not survive 5 years in business. It may come as a surprise to you yet many entrepreneurs do not have a business plan in the bag when launching a startup. As overwhelming as it may be, the mistake is typical for most startupers and entrepreneurs launching a new business.
Mistake No. 1 – no business plan as a major startup trouble
It is essential to draw up a business plan if you wish to create a stable business and stand out among competitors. A strategic business plan is a major advantage that promotes development and puts you in a better position as a market player with a clear and well-defined business strategy. Managing a small business is challenging enough and you should use all opportunities and chances available to promote yours and help it succeed.
Many startup entrepreneurs launch small businesses with no big picture in mind. They fail to understand the way the market, business models, logistics, or cash flows function. If things go wrong, the above lack of understanding may cost you invaluable time, money, and efforts.
To avoid the common mistake, you should develop a business plan that will identify unknown variables and gaps to fill in. It is good to know how you plan to produce goods and who to sell them to.
The business plan shall provide for every product your small business is about to develop or produce. With this, you will never go astray and the business will flourish.
Below, you will find the business components to include therein:
- analysis of business environment
- competition analysis
- sales market analysis
- break-even point calculation.
Failing to draw up a business plan for your small business before launching it is a huge mistake that may cost you a fortune.
Mistake No. 2 – lack of focus on cash flows and profits
Disregarding cash flows and profit margins is among the financial mistakes entrepreneurs make when running their business.
If you ask a savvy business person what skill is vital to make great strides in business the answer most likely will be math and calculations. Many entrepreneurs launch startups and businesses as a hobby without paying much attention to cash flows and related figures.
Business math is easy to do and understand. To realize how profitable your business may be, use the formula below:
profits = demand x (revenue – expenses)
Let’s take a look at the above profit formula. Suppose, 20,000 potential buyers search the Internet for your products on a monthly basis. If you efficiently present both you and your products to at least half of them, you will end up with 10,000 business leads.
With conversion averaging 1% to 2%, your sales will amount to 100 to 200. If an average order value is USD 100 and net profits make 30%, you will earn USD 3000 to USD 6000 per month.
These are rough estimates. Yet, if you do your math, you’ll get the end result. You can easily avoid the common mistake by tracking potential profits and cash flows from your business with the above formula.
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Mistake No. 3 – launching startups in the absence of reliable market research
Starting a new business in the absence of trustworthy marketing research is a huge mistake that may cost you a fortune. If you are about to study competitors and realize how you can stand out from the competition, don’t forget to do preliminary market research. You may face competition from other small enterprises and businesses that produce the same goods you or market giants like Amazon and Walmart do.
Business people often hurry to enter into new niche markets without realizing whether these markets are the right ones for them. Such niche markets may come with low demand and competition way too high.
To understand the market landscape you are dealing with, you should do a bit of research. For this purpose, identify your competitors and study the following:
- number of online reviews
- community commitment
- blogging habits
- press coverage
- SEO ranking.
With a clear idea of the market environment, you will face no issues entering a niche market and expanding your business therein.
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Mistake No. 4 – overwhelming range of products
A gross mistake new business founders can make when launching startups is that they try to sell too many products. If a product fails to sell, they may add more products to their goods range hoping that it will engage potential customers. The strategy is not always successful and may fail you.
Say, you own a shop selling eco-friendly bags that can be recycled yet no one purchases them. You decide to add more eco-friendly products from the supplier to your product range. Eventually, you will end up with a wide range of diverse products, with eco-friendliness being their only common feature. If your brand is all about bags and not any other eco-friendly goods you will face challenges with attracting customers.
The business mistake here is more of a branding mistake than product selection mistake. NB: the brand-building strategy is no less important than the goods you sell as the brand personifies the way people see and perceive a business.
Mistake No. 5 – no organic marketing investments
A popular mistake small business owners tend to make is paying little attention to organic marketing. The lure of paid-for advertising like PPC is easy to understand. It is reasonable considering you pay for advertising, while potential leads use the links and purchase your goods, and it brings you immediate profits.
Imagine, that you could drive traffic to your website at no charge. Even with initial organic marketing expenses in mind, 70% of clicks result from traditional Google searches. The first 5 organic search results account for 67.6% of all clicks.
It may be challenging to create appealing content for a boring market niche, for how many articles do you have to write about reusable bags? Content marketing matching your customer needs and interests and not the product itself is the key to success, with efficient marketing research ruling the roost.
Let’s go on with the reusable bag analogy. Consider who might potentially need reusable bags. These might be environment lovers who value a healthy lifestyle, yoga, and take care of their health. These are just guesses, yet, with a small study they may be confirmed.
With a customer-centered content marketing strategy that does not focus on the product, you will get more topics to write articles on and more ways to interact with your audience. Combined, they strongly promote business growth.
Mistake No. 6 – too much attention to promotions and discounts
Many businesses fail due to cost overruns on discounts, promotions, distribution of free product samples, quizzes and competitions. Some companies overdo it by giving away too many products for free.
Although gifts, contents, giveaways, and prize drawings are an effective method to promote products and goods, they are not suitable for every market niche. Discounts may be good for non-durables, perishable goods and/or repeat products like foodstuffs, skin-care products, food supplements, and the like. They do not work for any other product types though. If forewarned, you won’t make these mistakes when launching a business.
Mistake No. 7 – refusal of assistance
Trying to do things on their own is the principle many entrepreneurs are guided by, which is a typical mistake.
In the economy, there is a concept of opportunity costs. Basically, when you only use one opportunity and ignore the rest of them, the business is left with no free time to use any other opportunities. The cost of implementing such a single opportunity equals the cost of all other business opportunities combined. This is a huge mistake to make.
When launching their own business, many businessmen tend to do everything themselves. They configure websites, maintain them, upload software, write product descriptions, and do marketing.
Although being able to do things on your own is great in itself, it consumes too much of your precious time that can be spent otherwise. Spending it with family members and loved ones, shaping innovative ideas, or building new productive business relationships are all viable alternatives worth your time and effort.
Consider automating as many routine tasks as possible. It is true you will have to pay for it, yet you will end up with more pain in the neck trying to do it manually. Alternatively, feel free to hire freelancers who will gladly perform the above tasks like data input, etc., at a reasonable cost.
Unnecessary tasks should be excluded. At International Wealth, we consider unnecessary things like wasting too much time on developing a site logo, setting image sizes, or introducing insignificant changes that are only important and noticeable to the business owner.
Hiring an assistant is the right business solution for you. The latter may be your co-founder, a freelancer, or a part-time employee who can perform the required tasks and assist you with business expansion. You don’t have to do it all yourself. This is a mistake that should be avoided.
Mistake No. 8 – not knowing your target audience
Product quality studies consist of 2 parts:
- searching for product ideas
- knowing your customer.
The trick is to create a customized product for already available customers and at the same time find new customers interested in the already available product. In the above context, not knowing the target audience of your business is a major mistake.
When studying your potential market niche, pay attention to both analytics and economic indicators. Another important step that most small business owners skip is searching for an ideal customer and building a customer profile.
The best approach for an emergent entrepreneur to understand customers is through continuous communication with them. Go ahead and create an environment encouraging every employee who interacts with customers to gather information that promotes understanding of customer needs.
When you know who your customers are, what their behavioral patterns look like, and what the reasons therefor are, you can service them so that these customers would purchase all the goods your business offers.
Even where a market niche comes with sufficient demand and goods selection, selling goods may be challenging if you don’t know your ideal customer well enough. By avoiding the above mistakes, you will be able to promote and expand your business.
Mistake No. 9 – absence of a strong marketing plan
As mentioned above, having no reliable marketing plan is a business killer.
If you set up an e-commerce website guided by the knowledge of who your customers are and where you can find them, customizing your marketing plan is easy enough.
With no knowledge on the subject, a marketing campaign is like throwing spaghetti at the wall. You make a thousand attempts hoping that something will stick, which is another huge business mistake.
FYI: according to the available analytical findings, market analysts with a documented strategy in the bag enjoy a 313% higher success rate.
Every e-commerce business shall have a well-rounded marketing plan. It is clear that certain promotion channels will appear more efficient compared to the other ones. Some business people benefit from pay-per-click ads while the others achieve success through applying advanced SEO strategies or social net advertising. Regardless of what marketing plan you have, make sure it has been in use since the business launch date. While new opportunities appear naturally, a solid foundation will provide for a stable and scalable business growth.
Mistake No. 10 – no intellectual property protection
Intellectual property (IP for short) rights are rights for all products resulting from the original business idea.
A business may own intellectual property. If so, the above IP shall be protected from competitors. Such intellectual property includes copyrights, trademarks, patents, proprietary information, trade secrets, and commercial property, e.g., equipment. Where your IP has been stolen or your rights therefor have been violated, you should follow international procedures and rules and take legal action to protect your IP rights. Don’t make the mistake of giving up, for any intellectual property is worth fighting till the end.
IP rights vary depending on the holder’s geography. You should first turn to your jurisdiction’s legislation to protect your intellectual property rights. Acting otherwise will result in the loss of business and will turn into the biggest mistake an entrepreneur can make.
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