For many innovators like you, there’s nothing more fulfilling than bringing your vision to life: building your own enterprise from the ground up, and bringing to market essential products and services that catapult your brand into a household name. It’s this sense of ownership that many aspiring homeowners take pride in — and the promise of never working for anyone else again but yourself.
But just how much work does starting your own small business entail? It may surprise a lot of aspiring entrepreneurs, but setting up shop is actually the easy part; the real challenge — and more crucial part — is long-term survival.
The pitfall of many new ventures is in the lack of long-term foresight and planning that informs how they manage cash flow, invest in equipment, and position their products and services for brand recognition and customer trust. By failing to plan for these essential operations, new small businesses fold up quickly, even before surpassing the first-year mark.
Do you have a million-dollar idea for a new business? Read this small business start-up guide to learn about the common mistakes and challenges that new businesses face so that you can avoid them:
1. Not creating a business plan
Every new venture requires a solid plan. The amount of time and resources devoted to starting a small business requires mapping out essential activities ranging from product or service design to securing investors, sales, and future growth.
A business plan outlines sources of capital, cash flow projections, and the business model — important information that serves as a benchmark for defining goals and measuring progress to keep you on track for a successful setup and future growth.
How to fix it: Create a detailed business plan!
Creating a business plan also pushes you to confront hard truths about starting a small business, such as whether you have enough capital and the ability to generate generous returns on investment. As well, your ability to deliver quality products and services that customers will pay you well for.
Sometimes, taking the time to examine these factors is the best help — and necessary push — that aspiring small business owners need — discovering whether what they love to do or think they’re good at will sell, and if not, what will.
2. Generating capital and financial preparedness
What’s the difference between a million-dollar idea and a million dollars? Often, it’s capital and enough resources to get a potentially award-winning and profitable venture off the ground.
Whether you’re manufacturing a product or offering a service, there are always necessary capital resources involved to acquire raw materials and equipment, lease a storefront or office, and even hire valuable talent.
How to fix it: Project cash flow for at least 12 months.
A good way to determine financial viability — and often an area that small businesses need help with — is projecting cash flow. Any capital pooled from savings, investors, and bank loans needs to be recouped in profit.
While it’s common for most businesses to end their first year in the red, long-term financial planning, smart production methods, and effective sales strategies can help increase cash flow to make a business profitable in the long run.
Just remember, savings is key: Avoid acquiring assets using the operating cash flow, and instead consider small business financing programs with terms that match an asset’s lifespan, or factor these into initial capital expenses early on.
3. Not knowing the market
Market research is a key success indicator of any new small business. But it’s also very easy to forget or downplay its importance in the setup stage, as many aspiring business owners are eager to simply enter the market and generate sales. Without knowing the market, however, it’s also impossible to know who will buy your products.
How to fix it: Conduct market and competitor research.
Many small businesses benefit from the helpful insights of well-executed market research.
Are there similar businesses offering the same products or services at the same price point? How many of them already exist in the local area you want to serve? Similarly, who will vouch for your products or service — have you tried testing them, even among family and friends? What was their feedback?
Examining the existing market against your product helps you create differentiation and determine how you can position it to capture market share.
4. Neglecting the power of marketing
What’s the value of a good product or service if no one knows about it? Contrary to what some small business owners may believe, every product or service is just as good as its ability to stand out and be discovered in an otherwise saturated market.
With so much competition these days, it’s not enough to let a product speak for itself — chances are, it can’t, while the market is raving about the competition on Google, Yelp, and social media.
How to fix it: Establish an online presence.
Don’t discount the power of marketing: every small business needs all the help it can get, and these days that comes in the form of a well-executed and low-cost online marketing strategy.
While many competitors already enjoy the cushion and recall of an established brand name, online marketing allows competing products from small businesses — often at a fraction of the cost — to be discovered by a potential customer base through a quick Google search.
For small businesses, an online presence through a website, Facebook or Instagram page, or even an Etsy marketplace, can be an equalizing space that allows you to position your products and connect them with customers.
Advertise products using keywords that customers use to find them, grow your followers, and promote reviews through customer referrals and similar strategies to build — and monetize — your reputation.
5. Ignoring trends, technology, and external resources
Many emerging trends in customer preferences, production methods, and even administrative tasks affect small businesses. But just how much do you keep up with these developments?
Your business doesn’t operate in isolation: Its health and survival are determined by these trends. Adopting new technology or listening to expert advice could help it stand out from the competition.
How to fix it: Hire a business consultant and outsource tasks.
Similarly, many small business owners adopt a DIY, no-spend attitude towards many essential support services and resources. While it’s true that every dollar saved helps maximize profit, a lot of business owners are constantly bogged down by administrative, marketing, or even IT-related tasks they’ve taken on themselves.
But what you save in cash could also mean lower productivity or more expenses spent trying to fix mistakes down the line, especially if these tasks take you away from product design, manufacturing, or service delivery process.
To start, a business consultant can help identify opportunities for outsourcing tasks or hiring contractors, as well as keeping up with emerging industry trends to stay ahead of the competition.
To learn more about the mistakes to avoid when starting a business, call startMYplan at 1-888-831-6716 or contact us here.