When your small business is in its startup phase and has yet to establish a broad customer base and secure regular revenue, it is the time when your business is most vulnerable to failure. Many startups never quite get off the ground due to one or more critical mistakes being made. In addition to having metrics for evaluating success, it also helps to have warning signs to steer you away from failure. Here are three common startup mistakes and how to avoid them.
Sailing All Alone
Many people have the idea that hugely successful businesses are launched by one determined individual working all alone. In fact, that’s the exception rather than the rule. Starting a new business is hard work, and there are a myriad of tasks to be handled, such as accounting, business planning, marketing, advertising, and sales. It’s difficult for one person to handle it all and handle it well.
You may not initially have the capital to hire employees, but that doesn’t mean you have to accomplish everything working all by yourself. Reach out to friends, family, or business associates for assistance and advice. For example, perhaps you can’t pay a professional business consultant to design your business plan, but you probably know a savvy entrepreneur friend who would be willing to look it over and offer some helpful advice for free.
Poor Money Management
A number of startups — even ones that perhaps have obtained substantial funding from a venture capital firm — fail because of poor money management. The list of potential money management mistakes is a long one, but common ones include a basic failure to keep good accounting and expense records, and overspending.
Some startups simply fail to keep proper records and pay proper attention to how much money is going out versus how much is coming in, making the mistake of thinking that because they’re not doing a great deal of business yet, there’s no need to track every penny or conduct rigorous financial analysis. Businesses only succeed with careful money management from the very beginning.
Some startups have a promising beginning, but then fail because the company becomes overextended financially. A common example is that of a small business owner who, anxious to grow the business, takes on more employees than the business can pay for. Another example is being flushed with business investor capital, and wasting it on needlessly expensive office furniture. Startups that succeed are typically very cautious with their funds, always making sure to maintain a financial safety net.
Failing to Adjust to the Marketplace
You need a good business plan when starting a business. However, most businesses have to make some key adjustments to their business plan to achieve success. For example, a successful service business had a plan to sell a high-priced service, but found that potential customers simply weren’t willing to pay that kind of money. By offering a lower-priced version of the service, they were quickly able to establish a large customer base. Seek out feedback from potential customers to discover how you can make your product or service more attractive.