Why do so many new small businesses fail? What are some common mistakes that business owners make when they’re starting a small business? Today, we’ll look at sixteen of the most common reasons small businesses fail, and examine what you should do to succeed.
#1 Not validating the business model before investing.
Validating your business model is essential. If you haven’t tested your business model’s hypothesis with prospective customers, you should wait to invest. Validate your business model by gaining insights from potential customers, then altering your plan to fit your information.
#2 Not adjusting to what customers want.
No matter what product or service you sell, your customers expect the right price at the right time. Failing to adjust to customers is one of the most common small business start-up mistakes. We live in an era where consumer data is easy to gather; you have no excuse to ignore your customers desires and preferences.
#3 Starting other businesses too soon.
Entrepreneurs (and even investors) are easily excited sometimes. The success of one business can embolden a businessperson to start other franchises, or even a new business venture altogether. Businesses are a lot like children, they need a lot of care when they’re young and vulnerable. Resist the urge to start other businesses at least until your first business is mature and stable.
#4 Not having a clear elevator pitch.
Can you explain what your company does in 30 seconds? Is that explanation interesting? Would it inspire a customer? A great elevator pitch can do all of that. Let’s say you have a lemonade stand. Do you sell lemonade, or do you “provide a refreshing, Summer beverage for thirsty people”? Sell yourself!
#5 Focusing on revenue instead of profits and not having a clear revenue model.
Getting blinded by revenue is one of the most common small business start-up mistakes. Analyzing your profits is the only way to take your expenses into account. To build your revenue model, you’ll need realistic estimates of what your revenue will be. Remember–the right revenue model will attract the right type of investors.
#6 Looking at marketing as an expense rather than an investment.
Quality marketing can lead to a quicker than expected return on investment.
You need to create as much awareness of your brand as you can. Marketing is one of the most important investments a new entrepreneur can make. As such, you shouldn’t view it as an “expense”; marketing is an investment, and properly used, can be the most useful tool when it comes to building your business’s clientele.
#7 Expanding too fast into other markets without systems.
Many startups begin in niche markets, because they’re easier to corner. Often, early successes inspire startups to expand into new markets. Doing so without the proper systems and models can be a recipe for early startup failure. Remember: it’s better to be a big fish in a small pond, at least until your business is strong enough to swim with the sharks.
#8 Not delegating tasks sooner.
Time is one of your most valuable assets. Figure out early on which tasks you can delegate to co-workers, employees, or even which tasks you can hire somebody to do on a freelance basis. This will free up your time to focus on steering your ship–securing investors, developing a marketing strategy, and converting leads and potential clients into loyal customers.
#9 Following the industry norm versus having a unique selling proposition.
Sometimes it’s smart to “play it safe”, but not when creating your selling proposition. Ideally, you should find a unique target audience. By thoroughly researching your target audience’s purchasing history and preferences, you’ll get an idea of the products, services, and solutions that only your business can provide them.
#10 Shiny object syndrome distracting from your core business.
It’s hard to stay focused on your core business, especially when competitors introduce new products or expanding into new markets. Even so, always maintain focus on your core business. Stay well-informed and keep an eye on the future, but don’t take your eyes off the prize. Follow your original plans through to completion.
#11 Taking their eye off of receivables.
Debts can be unpleasant to talk about, but small business startup owners need to keep an eye on all of their receivables, especially when cash flow is an issue. It’s easy to forget about clients with a long line of credit, but it’s dangerous to ignore receivables for too long–it sets a bad precedent for your business.
#12 Getting distracted working in your business rather than on your business.
As a small business owner, your time is nearly as valuable as your capital. When an owner or manager doesn’t delegate tasks properly, the business becomes a ship without a captain. Although you must do both, focus more on working on your business than in it.
#13 Burning the candle and thus burning out.
Burnout causes many early failures. If you’re “burning the candle at both ends”, by investing far too much time or money into your business, you might be setting yourself up to fail. In business, slow and steady wins the race.
When starting a new business, it’s easy to spent too much time on it. It’s important to take time for yourself to decompress.
#14 Not celebrating minor successes and only focusing on problems.
You should learn from your failures, but you can also learn from your successes. As most parents know, positive reinforcement is usually more helpful and pleasant. Keeping track of your successes will show you what you do well and what your customers like. This data will guide your business in the right direction.
#15 Not pre-marketing sooner and not measuring marketing returns.
Marketing strategies are never “one-size-fits-all”. Your pre-marketing should include a several-pronged approach, attempting to reach prospective customers through different channels. Measure these campaigns’ successes (and failures) to get an idea of what works for you.
#16 Not learning to step away and reflect to control emotional reactions.
For many entrepreneurs, their business is their “baby”–they’ve nurtured it since it was a simple idea. This makes it difficult to make the tough, but necessary, decisions that will make your business more viable in the future. Don’t let emotion overpower your reason–seek advice from impartial experts.
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