Starting a business comes with its risks. Even though running a business is a lifelong goal for many, everyone makes mistakes when they’re starting out.
With anything new, it’s only natural to make errors and oversights. Yet, too many mistakes can ruin a small business. This list identifies solutions to some of the common mistakes that small business owners make so that you can avoid them, and start your business off on the right foot.
1. Make a business plan
A business plan is the first step in starting any business. It functions as a roadmap, detailing how your business will operate, make money, and sustain future growth.
It’s also going to be an essential thing to have if you want to pitch your small business to investors— they’ll want to see that you have a detailed understanding of your company and the market you operate in.
If you already have a clear business idea and know your market, then coming up with a business plan should be pretty simple. If you’re still trying to get a deeper grasp on how your company fits into the larger market, then a business plan can function as a great tool that helps you develop your idea and get organized. Either way, there are plenty of free guides and resources online that teach you how to write up a business plan.
2. Do market research
Before starting your small business, you’ll want to conduct market research in order to understand the competition and identify your target market. Look at what other people like and dislike about competing companies in your industry, and determine what your own company’s strengths and weaknesses are.
Also, whatever the product or service that you offer is, you want to test it before offering it to the general public. If you plan on introducing a new line of craft beer, for example, you should give out samples to friends, trusted colleagues, or a small group first, and ask for honest feedback so that you can hone the quality of it before bottling it and putting it on shelves.
3. Budget for marketing
No matter what you do, marketing is important. Without some kind of marketing, how will people know who you are, what you do, and why they should buy from you?
When creating the initial budget for your small business, include money for marketing purposes. This means setting aside money to create (or hiring someone to create) a website, run advertisements, and pay for other marketing materials.
To most efficiently use your money, fold a marketing strategy into your business plan. A marketing strategy will identify your company’s unique selling proposition, your pricing plan, the methods you will employ to gain customers, and how much you expect to spend on marketing campaigns.
4. Determine reasonable prices
In terms of pricing, the mistake a lot of small businesses make when starting out is not setting a price that’s too high, but one that’s too low. Many new entrepreneurs either undervalue what they offer or hope to attract customers by offering a low price.
However, as a small business, attracting customers with low prices is usually not a very sustainable strategy. Instead, you should realistically assess what your product or service is worth by taking a look at local competitors and the going rates in the industry at large.
Another way to help determine price is by looking at your own projected sales and setting a price that will net you a reasonable profit margin going forward.
5. Build a solid team
As an entrepreneur, your small business may just start out with yourself. But over time, as your company grows, you might find it necessary to bring new people onboard. These could be full- or part-time employees, or even freelancers.
Whatever the size of your team, make sure you surround yourself with smart, dependable people who you can rely on. Interview candidates, screen them (ask for references, run a background check for employment purposes, etc.), and only hire who you need.
When starting a small business, you shouldn’t back down from failure. At the same time, don’t make the same mistakes that so many other small businesses do. Keeping these common mistakes in mind will help you stay organized, productive, and, above all, profitable.