21 Jun Biggest Pitfalls For New Business Owners and How To Stop It
Biggest Pitfalls For New Business Owners and How To Stop It
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Starting a business is one of the most exciting adventures you could go on. There’s an element of hard work, dream of success and the risk of failure. The success of your business is the compilation of fiscal management, strategic planning and market awareness. The most important realization is, however, that starting your business is a risk. According to Bloomberg, 8 out of 10 businesses close in the first 18 months. Outside of lack of business plan or being underfunded (like most articles say) let’s look at some of the mistakes business owners have made and how you can overcome them:
Know your Value Proposition and Differentiation in the Marketplace. What makes you unique? Why should someone choose you over the competition? You started this business for a reason, make sure your business resonates with the community on why. Make sure your business and it’s employees are aware and believe the “why” and “what” themselves. Without it, you’re just another business.
Poor Decision Making Skills. Every business should have help. Entrepreneur’s (especially first timers) need to know know their strengths and limitations. Don’t be afraid to hire help on accounting, business strategy, marketing, advertising, brand awareness, and customer service. It’s better to outsource professionals than taking away time from what you’re good at to learn something new.
Rapid Growth and Over-Expansion. Know of a company that just took off their first year in business but then went out of business in year two? Too many business owners want to dominate their local marketplace and once they’re about to, decide to then take on another project and split their time in half on what was making them grow in the first place. This can cause you to spend or borrow money to make this secondary project or incurr additional expenses. It’s important to know when it’s the right time to expand your business and when to just continue to focus on your local customer base.
Not Listening to your Customers (Overconfidence). If you’re not keeping up with the trends, chances are customers won’t purchase your services in the long-term. Products and services need to adapt to the marketplace and if you’re not listening to that marketplace you’re falling behind. Business owners have a habit of getting in their own way. Sometimes you can tell them the problem, they recognize you’re correct, yet repeatedly make the same mistakes. Learn to accept criticism and adapt.
Understanding Attrition. People are going to leave you. They will be unhappy with something that happened or they will simply just move away. For the most part, attrition happens through no fault of your own. Maybe another company comes in and offers a bigger, better deal. We are in the “Groupon” generation where customer loyalty plays second fiddle to the best deal. The easiest way I could explain this would be if you always had your car fixed at Joe’s Auto Repair and your oil change was due. You know Joe’s is always $24.99 but Midas has a deal for $14.99 for an oil change. How many people will go to Midas instead of Joe’s? Even if it’s just a percentage year over year, Joe will slowly be put out of business. Once they go to the new company, the new company now has the chance to earn their repeat and referral business that you relied upon. Businesses lose customers through attrition, you constantly need to find new customers to make up for the ones you lose.
Not Advertising. If you make the best product or have the best service in the world, but nobody knows about it, what good is it? I’m going to say this as bluntly as I possibly can: You’re an idiot if you run a business and think that it can be sustained and profitable by repeat and referrals only. This isn’t just the marketer in me trying to sell someone the idea of advertising and marketing their business. It’s a fundamental necessity. Harvard business school, the leading business school in America, says that a business should set aside 7-10% of their gross sales towards advertising and marketing their business each year. Why keep your company a secret? Business owners should take advice of the experts and market/advertise their business.
No Website (Or a crappy one). You’d be surprised to know how many people I talk to that own businesses try to build websites themselves and think that it will be just fine. Cutting corners on the medium that most people use to select a product or service nowadays is one of the dumbest things you can do. Websites are your first impression. Smart business owners invest into their first impression because you can never get that back. At the very least, your website should be designed to have customers easily find out about your business and how to contact you on every page. If you don’t have a website, you’re probably going to lose business to those that do. If they can’t find your website, then you probably should hire a company that can optimize it for major search engines.
Low Social Media Presence. Social media is not designed to generate much new business for you. Business owners should know the power of social media is to connect with those who know and love your business (and why not have them share it with others in the process). It’s an opportunity to listen to what people love about you or what their concerns have been through recent transactions. People will say online what they are afraid to say in person. Building and being aware of your reputation online is one of the best things an entrepreneur should know.
So why do 8 out of 10 businesses fail? It’s simply because they’re great at their craft but don’t understand or choose not to understand the other aspects in their business. Those that have a solid business plan, continue to create sustainable cash flow and learn to accept their shortcomings while adapting to the ever changing market will succeed.