Opening a new business is a scary endeavor. Often, entrepreneurs understand their service very well but lack the understanding of business to keep themselves afloat. Having a little base knowledge in the world of business is necessary to avoid some of the most common new business mistakes. Take a look.
No Plan or Purpose
One of the first steps to success in any endeavor is having a goal, purpose, and plan. This same concept applies to business. It’s essential to know why the business exists and what it’s planning to achieve. The answers to these questions serve as the basis for all business decisions. Decisions should be made with the overall goal of the business in mind. This is necessary for growth and moving forward.
Accompanying your purpose and goals should be your strategy. What are you looking to get out of your business in the next year, and how do you plan to get there? Regardless of the size of your organization, you need a plan to achieve the goals you’ve set out for yourself. Your business strategy should be evaluated at least once yearly to assess progress and identify new goals. Your strategy should be written out, and if you have employees that should also be aware of the direction that your looking to go in.
Lack of a Budget
Just like in personal finance, not having a budget often results in the disappearance money. As John Maxwell has said, “a budget tells your money where to go, rather than wondering where it went”. The same concept applies to the financing within your business. In order to ensure profitability, an annual budget is necessary. Operating within a budget ensures that the funds to achieve the set out goals and strategy are allocated.
Cash flow problems represent a common new business struggle. It’s important for entrepreneurs to understand how to read a cash flow statement. Because many devote so much of their time to the business’ service offerings and general management, they forget to measure the most important metric; how much money is coming in. Learning to monitor the cash flow is critical to staying afloat.
The biggest marketing mistake to make is simply not marketing at all. And, believe it or not, this is pretty common. Many small business owners and entrepreneurs lack the understanding of how impactful marketing is on their business. It’s extremely important to gaining new consumers, retaining old consumers as well as building a professional network. Marketing is a key component of the small business; regardless of the businesses age.
A marketing strategy should accompany your business strategy. What specifically are you looking to gain from your marketing efforts? New clients or more branding, or both? The marketing plan should coincide very closely with your business strategy. It’s a supporting document to what your ultimate goals are. Build your marketing strategy to support the goals of the business. Identify what marketing tools you’re going to use; web advertising, content marketing, etc. Having a written plan ensures that you stick to your marketing efforts.
Don’t stop marketing just because you get busy. Keep marketing through it, because then when a slow period hits, you won’t be kicking yourself.
Poor Understanding of the Market
Pretending like you own the only business of your kind is living in a fairy tale land. You’re very likely not the only entrepreneur doing what you do. A thorough growth strategy includes an evaluation of the market in which your business competes. Looking at competitors, how much of the market they control and evaluating your ability to gain new customers within the market is how to gain an understanding of the market.
If you don’t have a basic understanding of the market, you may make decisions too rapidly that aren’t necessarily for the good of the company. For example, expanding very quickly after an initial success in a very competitive market. If a new business doesn’t recognize the very competitive marketing, and expands immediately after initial success, there may be some serious repercussions later when things die down. Slow growth, especially as you learn the market, is the smartest way to operate a small business.
Entrepreneurship is one of the most challenging and rewarding aspirations. It takes patience, dedication, and a certain level of skill. With the right tools, small business success is at your fingertips. It’s essential to have a written business strategy that outlines the goals of the organization as well as a plan to get there. You must operate on a budget to avoid cash flow problems and putting yourself in the hole. Marketing is a key component to growing your business. Don’t stop marketing even if you get busy. Keep at it. And, finally- learn the market and grow slowly. Doing this helps you avoid costly expansions that you’re not prepared to make.