When you decide to open a small business, you’ll face several obstacles throughout the process. Entrepreneurs need to be prepared for unexpected costs, problems with cash flow and personnel issues. Not to mention the challenge of creating a strong customer base and marketing effectively. While many of these obstacles are frustrating, perhaps some of the most challenging problems you’ll face will be the ones you cause yourself. After all, you are a new business owner who’s bound to make mistakes.
Mistakes are part of every new entrepreneur’s journey, but what matters is how you learn from your mistakes. By overcoming obstacles and accepting the lessons that come with them, you will put yourself on a path to success. Of course it is helpful to start your business prepared and equipped with knowledge but some things you just can’t plan for. And until you do have to tackle a certain mistake head on, you can take the time to read, listen and learn from the mistakes of others — chances are you’re not the first small business owner to be in a difficult situation. So, let’s talk about some common mistakes most new entrepreneurs make to help you avoid them.
1. Failing to Plan
One of the biggest mistakes a new entrepreneur can make is failing to create a realistic business plan. A business plan should include the exact steps you’ll take to become profitable. It should be organized and should include backup plans for unexpected situations. It needs to include your exit strategy and end goal for the company as well. Although not a required portion of a business plan, the ongoing COVID-19 pandemic has highlighted the importance of creating a business continuity plan so make it a priority, too.
When you have a plan in place you are more likely to accomplish the goals you have set. With a business plan you can make sound business decisions, obtain loans and even get investors to jump on board. There are plenty of free tools to help create a plan and be sure to have existing employees participate in the process. After all, the saying goes: “When you fail to plan, you’re planning to fail.”
Some specialized businesses may require including additional elements in its business plan. To get you started, check out these business plan guides for some popular businesses:
2. Waiting Too Long to Hire
Waiting too long to hire or hiring in times of desperation can significantly hurt the growth of your business. This is one of the most common mistakes small business owners make while trying to expand their companies. If you wait until the workload piles up or hire the first person who walks through the door, you could end up with more work instead of getting the help you need. Chances are you’ll need to spend a considerable amount of time training that person so getting them up to speed at a time when you needed their help weeks ago might leave you feeling more stressed than relieved. Plus, you may make a poor hiring decision by rushing the process.
Start by delegating small tasks from the get-go, to make your life easier in the future. Enlisting the help of others from the beginning is the best idea for your new company. Also, always be aware of your entire business model, so you can identify when’s the best time to hire. An inexpensive way to do this is to start by hiring freelancers so you only have to pay them for the time you need. You can foster a relationship over time and maybe bring them on full-time when the circumstances are right.
Take your time and be selective when hiring, so you can find top talent for your business. Be careful choosing, because you’ll end up investing a lot of time and money in those people. And they will of course, be the foundation of your entire company.
3. Starting Without Proper Funding
Owning a business takes tons of capital, and if you don’t have a reserve in the bank things will prove to be difficult. Starting with the proper funding can give your business the chance to compete in your industry.
Finding the right small business loan can be time-consuming, so you never want to wait until the last minute, or you could end up having to settle. Stay on top of cash flow and create financial forecasts for the future. This will help you identify when you’ll need additional funds, so you can take steps to seek capital. A small business loan will give you the funding necessary to create a sustainable business.
4. Overcommitting Yourself
The excitement and hunger for success drives you as a new entrepreneur, and it can be easy to overcommit yourself in the first few months of operation. You can get caught up in the hype of your new-found success and end up draining yourself and your employees.
When you give too much of yourself, you will eventually run out, which sets your company up for failure. You will find it even more difficult to scale your business than it was before. So, it’s extremely important to find balance with your work and home life, in order for your business to be profitable.
5. Not Prioritizing Sales
This is a mistake you need to avoid making as a new owner. When you fail to pay attention to cash flow, you will run into all sorts of problems. You need capital to operate a viable business, and if you neglect sales, your company will crumble.
Sales are everything in business, so you need to make cash flow your number one priority. Make sure your concept works, by getting people to pay for it, before you spend valuable time building a company around it. Focusing on sales will help generate the revenue needed to scale your business as well.
6. Underpricing Your Goods or Services
Underpricing your services can be a detrimental mistake for your new business. The temptation to lowball prices to attract new customers is high for new owners, but you can’t give in. If your prices aren’t high enough to make a profit your business will slowly fail, even as you make new sales.
That is why it’s so important to create financial forecasts, so you can see what it will take to become profitable. Then you can set your prices so you can compete within your industry and generate enough income.
The Bottom Line
At the end of the day, you shouldn’t be afraid to make mistakes, because you can learn valuable lessons through them. Instead, you should be afraid of making mistakes that could’ve been easily avoided. Be sure to have a business plan ready, and a team to help you with important decisions.
Hopefully, by reviewing these common obstacles, you will have a better understanding of what it takes to start a successful business and what roadblocks or behaviors to look out for.