According to the Bureau of Labor Statistics, 70% of businesses fail within the first 10 years of operation. Approximately 20% fail during the first year, and 30% of all startup companies will fail by the second. By the fifth year, only 50% of the new businesses will remain, and by the end of the decade, only 30% of all new businesses will thrive.
Regardless of whether you’re an established business owner or a startup, you’re bound to encounter different types of hiccups along the way. But that shouldn’t stop you from gaining more momentum. The key to success is to identify the most common business mistakes, learn from them and prevent the same mistakes from happening again.
Even before you open the doors to your business, it’s important that you’re aware of the most common mistakes that can hurt a business.
7 common mistakes to avoid
- Doing everything yourself
As a business owner, you’d naturally want your business to succeed. With that, you might think it’s better to do everything yourself. However, in reality, you only have limited time and effort to spend, and you can’t spread it all on the different aspects of your business. Not only will you be inefficient, but you’ll also tire yourself out eventually.
As a business owner, you must be aware of your strengths and focus on them when running your company. Identify the areas you’re weak in and hire people, who actually love doing the task, to do it. By designating, you’ll be able to create a strong foundation for your new business.
- Inadequate financial resources
Lack of capital is one of the most common reasons many businesses fail. Although most business owners are aware of how much they need to cover expenses like utilities, rent, payroll, suppliers and other day-to-day costs, many fail to realize how much revenue they generate through their products or services. This disconnect eventually takes a toll on their finances, causing cash flow shortages or, worse, business closure.
To avoid this problem, always prepare a financial projection for the first year of business operations. This will help you plan how to allocate your finances and secure financing and other financial resources.
- Not having a marketing strategy
The only way to get people to do business with you is if you get the word out there. This is where business marketing comes in. However, many business owners often think marketing is expensive, which is why they put much effort into it or avoid it altogether. One thing they don’t realize is that they won’t be able to generate enough buzz around their business if they can’t attract customers to it. Having no marketing strategy not only leaves your business behind but will eventually lead to your downfall.
If your main concern is the cost, there are a lot of cheap marketing strategies out there. For instance, social media platforms are great avenues for reaching millennials and Gen Zs. You can make a social media profile for your business to announce your opening or special promos to reach your target audience. For the older population, you can use print advertising (i.e. newspapers) to advertise your new business. These efforts don’t require a substantial financial investment and are practical strategies, especially for startups.
- Pricing products or services too low
Many business owners think that if they price lower than the competitors, customers will choose them over the others. Be very careful when pricing your products too low to gain market share. While there’s nothing wrong with cutting prices every now and then for marketing purposes, you also have to ensure that you’re still generating profits. If you’re losing more than you’re gaining, then it might be time to reevaluate. In reality, many are willing to pay for more if it means high-quality products or services. Even during tough economic times, people may choose quality over quantity.
When pricing your products or services, always do your research on the costs. It’s also important to monitor your costs overtime, so that you can make the necessary adjustments.
- Setting unrealistic business goals
It’s OK to dream big, but make sure you don’t set unrealistic business goals. Many entrepreneurs go into business thinking that they will get 100% (or more) of returns overnight. Setting the bar too high can be discouraging, and if you keep missing your goals, it could eventually drain you emotionally. As a result, you’ll lose your passion and give up on your dreams prematurely.
When setting goals, always make sure that they’re specific, measurable, accountable, realistic, and time-bound (SMART). This way, you’ll be able to see steady, but continuous progress. You’ll also avoid disappointments and find some motivation as you achieve the goals individually.
- Trying to grow your company too fast
Success doesn’t come overnight. Growing your business too fast can expose you to more growing pains than you can handle. For instance, you may be under-equipped to handle a sudden influx of orders from customers. With that, you may try to bridge the gap by hiring more people too quickly and end up hiring the wrong ones. Additionally, your cash reserves may not be enough to cover your business’ rapidly increasing costs. That alone is enough to bring your business down.
The truth is that it can take years to see astronomical profits from your hard work. Sometimes, it’s better to see your company grow at a slow but steady pace.
- Ignoring the competition
It’s an amateur mistake to think you won’t have any competition when starting a business. Even when you have the latest equipment or offer top-notch service, expect that there will be at least a few businesses that provide the same services or products as you. They may choose your competitor over you because they offer extra services or their location is easily accessible. In that case, you’d need to up your game and do something about it.
You also need to consider the market saturation when studying your competitors. For example, if you’re in the salon industry, there might be hundreds of other beauty salons in your area, so the market may already be saturated with hairdressers. With that, you may need to come up with ideas that will make your business stand out.
Before launching your business, always do competitive research. Try to study what they offer and compare them to yours. Identify which areas they excel in and where they’re the weakest. Use the information you gathered to improve your services or product offerings.
As a business owner, it’s important to be well-informed of the most common mistakes so you can avoid them. Running into these types of problems can have serious consequences for your bottom line and your business as a whole. By being aware of the most common mistakes and steering clear of them, you’ll ensure your business lives on to see another busy day.