It always saddens me to see small businesses fold, but even more so when they close down within a year or two of opening. For the most part it’s for the same basic reason time and again – “someone started the wrong business in the wrong place in the wrong way at the wrong time”.
Starting a business and keeping it going for the long term is not an easy task – it involves understanding the top 10 biggest mistakes these business flops make and then learning from them.
Any one of these common mistakes could seriously sabotage your business venture and turn it into a complete failure rather than a roaring success.
The Top 10 Biggest Business Mistakes You Don’t Want to Make:
1. NOT DOING A BUSINESS PLAN
If I had 50 pence for every time someone asked me “Is this a good business idea?” over the years… I’d be a wealthy man. The problem is, unless I actually write a business plan, I have no idea whether something will work or not – and you won’t, either. That’s the MAIN purpose of a business plan.
I’m not going to hold back any punches – it is time-consuming and it does command a fair degree of research, but investing the time now will save you so much time, money and agony later.
2. DOING WHAT YOU LOVE
The person who first said “Do what you love” – should be shot. Or at least forced to eat 3 bowls of pickled onions mixed with ice-cream whilst wearing a very tight pair of spiked and studded under-pants that are turned inside out whilst doing sit-ups in a sauna room with the heating turned up full.
Don’t get me wrong – it does sound fine in theory and being passionate is important but the reality is that there’s a whole lot of people out there who love things that they are just not good at.
My official advice? DON’T DO WHAT YOU LOVE – do what you’re good at and what people will pay you (well) for. It’s not so catchy or cliche, but it is a whole lot more profitable.
3. NOT DOING ANY MARKET RESEARCH
Increasing numbers of people are starting businesses without bothering to do any market research – and it simply leaves so many being crushed and broken hearted when their businesses (which they’ve invested so much time and money in) collapse.
Do what’s needed – test your products and service FIRST before you start a business. If you don’t you could be left charging at full pace in the wrong direction with your business without knowing whether real people are willing to pay you for what you have on offer.
You may think you make the tastiest beef stroganoff in the world – but will anyone else?
An idea is just an idea – not a business. When you’ve tested your idea out with real people and got lots of feedback – it’s only then that you can reasonably know if you have a business or not.
This is the essence of market research – test, test and test again.
4. IGNORING THE COMPETITION
Ignoring the competition won’t make it go away – and can be fatal to your new business.
Simple question #1: If you’re selling your thingamagigs for £12 apiece and Shania down the street is selling her thingamagigs for £8 apiece, how many thingamagigs are you going to sell?
And what if Shania’s thingamagigs ‘look’ / ‘smell’ / ‘feel’ / ‘taste’ better than yours? I agree it’s not as black and white as that – but again we’re talking about the doing right research:
- Pay attention to their ads
- Visit their business regularly (on and offline)
- Ask business colleagues about each specific competitor
- Ask your competitors clients, customers or students (what’s good, bad and indifferent)
- Be a customer of the competition so you can get a full inside experience
- Signup to their memberships, loyalty programs and newsletters to understand how they work and what offers they promote and when
Another aspect of competition you need to understand is market saturation. No matter what market you are in – the pie is only so big, especially in a localised area.
So if you want to open a dog grooming business, there may not be any “room” left in your local area to do so if the number of dog grooming businesses that already exist is too many.
5. NOT TAKING INTO ACCOUNT YOUR OWN STRENGTHS and WEAKNESSES
We all have strengths and weaknesses – there’s no denying it. Unfortunately, sometimes our strengths or weaknesses don’t fit well with the business model we want to use. This in itself inevitably leads to disastrous results.
For example: if you’re not a friendly, outgoing type of person with good people skills – retail is not for you. It doesn’t matter how many years you’ve dreamed of opening that restaurant or book store, it’s not for you.
That doesn’t mean you can’t buy such a business or start one yourself – but for it to succeed, you need to be aware that working behind the counter is not something you should be doing – be honest with yourself. You’ll need to hire staff that are naturally a better fit for doing it than you.
6. NOT UNDERSTANDING WHAT YOU’RE SELLING
You may or may not of heard of Helena Rubinstein. She was the first self-made female millionaire. Her first business distributed and sold face cream.
Now she didn’t become rich selling face cream – she became rich selling beauty.
One of the phrases she used to say was: “There are no ugly women, only lazy ones”.
It’s true she did distribute a face cream that her Polish mother used to use – but note the distinction of what she was really selling.
She sold BEAUTY not the cream – which was emphasised in her catch phrase.
Understanding this distinction is what made all the difference and inevitably lead her to be the first self-made female millionaire in the 1920’s.
If your business is going to be successful – you need to know what you’re actually selling, understanding your target audience’s pains, hopes and desires and craft your unique selling proposition and message accordingly.
7. NOT MAKING SURE YOU HAVE ENOUGH MONEY
95% of businesses will not make money when they first open. A large proportion will not make any significant money for years. The 5% exception are businesses that are “carry-overs” – i.e. employees who became contractors (this is a fairly common practice in industries such as IT).
Now this means that you (and your family) have to have enough money to live on while your new business is getting established, as well as enough money for the business to survive and grow.
8. NOT INVESTING IN MARKETING
“Build it and they will come” – is another abused popular saying that is so far from the truth. They will ‘come where?’ ‘Why?’ Or even ‘when?’
No one will ever know without any effective marketing.
This effective marketing includes working a well structured strategy in several areas of your business, such as for lead generation, pricing, promotions, customer loyalty, positioning, service delivery, testing, ongoing market research, etc.
Far too many small businesses are reluctant to spend any money at all on marketing – let alone a significant amount that could make all the difference.
Free marketing can be excellent in some ways – but most free marketing strategies such as working a referral system take a significant amount of time before they can become effective – and even at the heart of it, if you think about it they aren’t really free anyway.
Each one of these strategies costs you in time and still demands certain levels of marketing investment to get the kind of flow of regular customers that your business needs to survive and get beyond the initial 2 year hump phase.
You can’t get away from the need to create a systematic marketing plan. And not to just create it but to work it day in and day out by setting up marketing campaigns and then to keep doing it – whilst continually reviewing and testing your results.
My best tip? Market your business before you open it. There’s no rule that says you have to wait until your physical or virtual doors are actually open.
9. NOT BOTHERING WITH ANY ONLINE MARKETING
One way or another, your small business has to be online – there’s no getting away from it. You may or may not feel you need a website, a facebook page, a LinkedIn account or a Youtube TV channel – but just think about it for a moment.
Your business needs to be to be promoted to and found by the ever increasing number of people who now use the Web (via their computers, phones and mobile devices). These people (your future customers, clients or students) search online on a daily basis to research and find the products and services they want to buy before they do anything else. Even if it is just to check a business out they are thinking of using.
If you’re not there – your competition surely will be.
Just make sure you establish some sort of online base for your business and be sure that your small business is listed in as many of the online directories as possible.
Actively marketing your small business online is essential. Not doing it because you are unsure of how to do it is no longer an excuse. Don’t get debilitated by procrastination – turn to an expert and get some guidance and help.
Once you start doing this it will give you a far better chance of reaching your customers on a more regular basis and the beauty of being online is it works day and night, even when you are asleep.
A small tip – you may of noticed that many businesses these days engage customers through social media (as part of a much larger overall strategy). Now this is definitely not the be all and end all but if you prefer baby steps it can be one place to start in the meantime.
10. TRYING TO DO EVERYTHING YOURSELF
You can’t – it’s tempting to kid yourself you can – but the fact is you can’t. It’s that simple and that aggravating.
Running a small business – even if it’s a one person business – involves so many different tasks that no one person can do them all well.
Even if each of us was perfect and had all the skills to do an outstanding job at whatever we set our hands to (which I know I tell myself at times) each of us is still constrained by time.
Most days business owners are simply lucky if they can even get done what they originally planned at the start of the day.
So do yourself a favour and increase the chance of your business succeeding by getting the help you need from the get-go. Learn How to Delegate, hire and outsource to make the most of your skills and benefit from outside expertise.
For example, do you really need to do your own accounting? Accountants have a lot more financial and tax knowledge than you have (as they do it day in and day out) and in turn their expertise can save you a bundle of time (and even money!) at tax-time.
Another near enough essential tool for long term business success is in creating an advisory board for your small business.
You want to select and approach “the brightest and best” with a diverse range of skills and experience. There are certain successful methods and skills employed in creating your own advisory board which I may do another post on – but when you set one up it gives you a real and significant management advantage that can take your business places you could not of imagined possible beforehand.
If starting a business and building a successful business is important to you – understand that starting a business and building a business is a process, not a single event.
If you take the time to do the thinking and research and get all your ducks lined up in a row, you’ll hugely increase the likelihood of your business succeeding.
FEEDBACK and QUESTIONS
If you are the type of person that likes to share and add value to people feel free to post your comments below. Let me know what you have found useful from this list and what else would be practical and useful to explore further.
Below is a rather insightful video that is full of nuggets it includes several highly successful entrepreneurs from several businesses including facebook that are sharing what they believe are the top 10 mistakes in running your own business. They share their real world experience (not theory) to a packed auditorium at Stanford Graduate School of Business.
The TOP 10 BUSINESS MISTAKES MADE BY ENTREPRENEURS
(Stanford Graduate School of Business)
Thanks is given to Susan Ward and several others for sharing their insights.