10 Biggest Mistakes New Business Owners Make and How to Avoid Them
Starting a new business can be exciting and invigorating. With the right mindset, you can drive your start-up to success and corner your local market or niche. Eventually – and with the right market conditions – you may even grow a gargantuan business that you can run for the rest of your life or sell for a major profit.
Of course, you must avoid some major mistakes to reach that success. So today, let’s break down 10 of the biggest mistakes new business owners make and discuss how to avoid them and keep your star-tup ship from sinking.
Not Having a Business Plan
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For starters, the worst thing you can do when launching a new business is to begin your venture without a business plan. “A business plan, in a nutshell, is a breakdown of what you hope to achieve and how you’ll achieve it,” says Max Schwartzapfel, CMO of Fighting For You. Without a business plan, you won’t know what steps to take or how to progress your business from an idea to a real enterprise.
In fact, it’s a good idea only to start your business when you have a solid business plan in place. On top of that, a business plan is necessary to get funding from financial institutions like lenders and venture capital firms.
“The last thing any venture capital firm or bank wants to see when someone comes at them with a business proposal is a lack of planning,” says Breanne Millette, CEO of Bisoulovely. “It shows them that they don’t need to take the would-be business owner very seriously. It also means that, even if you secure some financing, it may not be as much as you hoped to initially receive.”
Bottom line: do not become a business owner without a business plan!
Marketing Without Strategy
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Similarly, you’ll make your work harder on yourself if you try to market without any strategy. Good marketing is contingent on having an excellent marketing strategy in place, which tells you:
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Who your target audience is in terms of their demographics, age, etc.
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What your target audience wants or needs
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How you should speak to your target audience to get them to connect with your brand
“If you market without a solid strategy, you’ll essentially be firing advertisements into the void,” says Jason Panzer, President of Hexclad. “All you’re doing is wasting your marketing dollars when they could be put to better use.” Instead, develop a comprehensive marketing strategy to:
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Create advertisements and content that speak to your target audience members
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Market more cost-effectively – you’ll spend less money on your marketing to acquire more conversions with a great strategy in place
To accomplish this, do extensive market research before putting out your first advertisement or developing your brand identity. With enough market research, you’ll know exactly how to present your brand to your target audience as the go-to solution for their needs.
Avoiding Leadership Responsibilities
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“As a new business owner, one of the worst mistakes you can make is running away from your leadership responsibilities,” New Melchizedec S, Founder of Expertrec says. “Simply put, as the business owner, you are where the buck stops.” You need to:
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Be able to make important decisions for the brand when needed
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Be able to lead your team through thick and thin
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Be willing to hire or fire people if necessary
This is a tall order, especially if you don’t have any experience leading a business quite yet! But it’s an important part of being a business owner, no matter your niche or industry.
If you want to get better, consider taking a leadership class online. “You can also start small; begin your business with a handful of employees you know reasonably well, then develop your leadership skills as you invite more people to join your team from around the industry,” says Brianna Bitton, Co-Founder of O Positiv.
Hiring Anyone
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Another big mistake? Hiring just anyone to meet your hiring quotas.
Emily Saunders, Chief Revenue Officer at eLuxury says, “Every business is only as good as the people working within it. Therefore, the quality of your employees directly correlates with the quality of your products or services.”
For your startup business to be a success, you need the best working for your brand. You should never:
Why not fill positions with temporary workers? Because one bad employee can cause long-term issues for your organization. They can ruin your reputation, produce subpar products, or be rude to customers: all major problems you’ll have to solve as the business owner sooner or later.
Setting Unrealistic Goals
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It’s tempting to let your dream of starting a successful business run away with you. But as a business owner, one big mistake is setting unrealistic goals, whether they are for a certain number of stores built, a certain amount of revenue, or something else.
Instead, you should try to keep your goals realistic. “Set reasonable expectations for your early revenue and productivity, especially in the earliest years of your enterprise,” says Daniel Kroytor, CEO of TailoredPay. When you set realistic goals, you can better follow your business plan and achieve those goals without feeling down or depressed.
On top of that, setting unrealistic goals is bad because it sets up your workers for failure. Nothing drives people away from an organization faster than the thought that they will never reach the unrealistic goals of their boss!
Not Saving Money
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When you make your first revenue, it may be tempting to funnel it back into your business expenses or spend it on something nice, like a brand-new suit or desk fit for a business owner. However, you should save money at the earliest opportunity.
Why? Michael Burghoffer, CEO of PicoSolutions says, “Sooner or later, economic upheaval will affect your business no matter what niche you’re in.” With that in mind, not saving money is a major issue and a mistake you should avoid as a business owner.
Try to sequester away at least 1% to 5% of all your revenue as soon as possible. That way, you’ll have a solid nest egg built up in case your cash flow sources ever dry out due to an economic downturn, like a recession.
Expanding Too Quickly
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By the same token, try not to be a business owner who expands a business too early. “Don’t scale up your business to multiple retail locations, for example, if you don’t have enough cash flow to justify such an expansion,” says Matt Miller, Founder and CEO of Embroker.
If you scale your business too early, you’ll expend more money than you bring in, and you may increase your operating expenses so much that you can no longer afford to keep the doors open. Only scale your business when you are financially secure and able to do so.
Not Delegating
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As your business grows, you will need to learn how to delegate tasks to middle managers or supervisors. “No business owner, no matter their expertise or energy level, can run a business by themselves. You must remember this and delegate important jobs to people you trust,” says Kirin Sinha, CEO of Illumix.
Not only does this help you maintain your sanity over the long term, but delegating also shows your employees that you value their skills and trust them to help you run your enterprise. This, in turn, contributes to a strong workplace culture and can help your organization thrive in the years to come.
Setting a Poor Workplace Culture
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Speaking of workplace culture, you’ll make a big mistake if you set and maintain a poor one. A poor workplace culture:
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Drives employees away, leading to high employee turnover
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Affects your overall business reputation
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Makes it difficult to attract top talent when you need to grow your business or bring rockstar employees to your brand
A good workplace culture has the opposite effect. Therefore, try to lead positively, maintain an open-door policy, and be a business owner who doesn’t let subpar employees bully or negatively affect others.
Giving Up Too Early
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Lastly, you’ll make a big mistake as a new business owner if you give up too early. No matter how it looks on the surface, every business venture comes with its fair share of challenges. When you start a new business, you must be prepared to overcome these challenges. Do not expect the journey to be easy!
You’ll also likely face your fair share of setbacks. That’s OK! Giving up too early means closing up shop or declaring financial insolvency when you still have some money to move around. Don’t give up even if you don’t meet your initial goals. You might still be able to turn your venture around or secure funding from another financial institution.
Conclusion
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Ultimately, running a successful business is just as much a matter of avoiding mistakes as making the right decisions. Now that you know the mistakes to avoid, you can stay away from these major pitfalls and run your business successfully for years to come. Good luck!
