When you first start a new business, your main focus is to keep it going and growing. This singular focus can lead to short-sightedness that can mean stumbling into pitfalls that can lead to big problems for the future of your business. Part of setting the groundwork for success in the early days of your company is avoiding common small business mistakes others have made before you.
We want to help new businesses get over the hump and get on their way to thriving, so we identified common small business mistakes and recommendations for avoiding them in your own journey.
Now, here are a handful of common small business mistakes and how to protect yourself from them:
You need to be ready for problems that may come up so consider what those problems may be before they happen. Project alternate routes when you are conceiving your business plan. Imagine all of the possible routes your business may take. Some new businesses get stuck on one idea of what their target market is.
A problem with your products
By nature we do not want to admit that there is a problem with our products. But we need to be realistic about what is working and what needs improvement. Regularly check with the people who have purchased your products. See if they think there is anything you could do to make the products better. Host a survey and give customers a discount if they participate.
The problem with your product may be just related to the price. The pricing problem may be that you are selling your product outside the price range of your target audience.
For instance, If a 16 ounce coffee cost you $0.75, that’s for the coffee, water, cup, wages, etc, and you charge $3.25. You might find that some people cannot afford your coffee. But what can you do? You can lower your price, and your profit, to a price your target audience can afford. Or, you can offer sizes, offer a 12 ounce coffee, that cost you $0.55 and you can sell for $2.50.
Your pricing problem may also go the other way. You may not be charging enough. It sounds like a great idea to undersell your competition, but it comes at the cost to your profit. If a 16 ounce coffee cost you $0.75, selling it for $1 sounds great, you will get more people coming to your shop, so many you may even get discounts on your cups or the coffee beans, so that it cost you $0.65 per 16 ounces. But your profit is so low that you never move ahead, you never get enough to add to your business, so you are stuck selling just one thing, a 16 ounce coffee.
When you set your prices, consider what you want to add to your business: new products, new decor, a new location, etc. Then figure out when you want to reach these goals and set your prices accordingly, being careful not to fall into the pricing traps above. Invest in the things that will increase the value of your business. Appearance is important but your bottomline should be firmly in focus when you’re considering upgrades.
A problem with your management
When you first start out, you may be the only person working at your business. But your number one concern needs to be managing the business and thinking long term.
When you are running a business that is just you it is easy to put something off, “Oh, I can take care of it this evening, tomorrow, after the holidays.” But the problem is that your clients may not find that optimal and will look for a business that is going to get the work done in a timeline that works for them. If it is just you working at your business, you still need to manage your time, and set specific sets of time for work. If you are losing sight of major business concerns, you need to consider hiring employees to handle specific aspects of your small business to avoid this common mistake.
On the other side of the coin, you need to be careful who you hire when you are starting out. One problem some businesses have is to hire the cheapest possible people to do the work for them. This is not a good idea. You get what you pay for.
A real world example of this comes from the restaurant chain Joe’s Crab Shack. They decided to set their wait staffs’ wages to $14 per hour (going up from $3 per hour in some cases). Now, not only will the turn around on employees be lower, but they can also get some of the better wait staff to come and work with them because they are willing to pay more. Some people say that this will cause a drop in pay because some waiters and waitresses make so much in tips that they make far more than $14 an hour. But the security of $14 an hour will likely lead to a quality workforce that will increase overall client experience and ultimately revenue.
Another management issue that often comes up stems from new business owners wanting to seem like the nice, laid back person who is willing to let employees show up late, take long lunches and in general take advantage of the business. If your business is the kind that can accommodate relaxed rules, great! But more than likely, you and your employees will need structure to succeed. Most businesses need to have employees there to take care of your customers (either in real-life or via phone calls and e-mail), if they are not around to help people, or are opening late, that is a problem. It is also a problem if unprofessional behavior is leaving a bad taste in your clients or customers mouths.
More than likely you will need to establish a balance between having a desirable work environment and the productivity of your workforce. Before you hire your first employee, create guidelines about the expectations and environment. The right balance is likely somewhere between super strict and super relaxed. Continually tweak as you hire to ensure your business is productive and professional and that employees are comfortable and cared for.
Issues with your Advertising
In the beginning, many small businesses ignore advertising completely. This is the biggest problem you can have when it comes to advertising. You need to advertise to build your client base. Creating a marketing plan (whether or not you have the money to execute every item on it right away) should be one of the first steps you take when launching your business.
Another common problem is advertising to the wrong group of people. When you advertise, you want to make sure you are getting your message out to the right people. If you are musician writing and selling music that fits in with modern pop music, you would not want to create a Facebook ad and target it to Baby Boomers who listen to the Beatles and Beach Boys. To avoid this problem, explore your options and map out a marketing plan. Is Twitter the right place for you to advertise? Is print? Is Facebook? Should you do Google AdWords? Launch a few campaigns and track their progress, then tweak them to get you the most bang for your buck.
But beware, there is such a thing as over advertising. One way to over advertise is to send out your advertising to everyone, no matter what. Mass marketing can work, but it can also turn people away. And will also cost you more money, money you can instead spend on marketing to a smaller group that is likely to actually buy what you're selling.
Over saturation can be a problem for another reason too. Seeing the same advertisement over and over again can make some people to consider checking out your products. But it can easily send just as many people away when your ad becomes an annoying part of their day. To mitigate this potential problem, consider creating several distinct ads that highlight different aspects of your business. Your potential customers may see you often but they won't be seeing the same thing from you every time.
So, have you just started your business and seen these problems crop up? Or maybe you are getting ready to start a business and have not considered some of this. We want to hear about it, tweet at us! These common small business mistakes can be avoided or addressed. Solving them just means looking at the big picture, anticipating problems and making adjustments to issues when they crop up.