Too many startup businesses don’t make it past that all-important third year. Any number of outside factors can contribute to a failing small business, but there are plenty of mistakes made by new business owners that lead to failure time and time again.
When it comes time to start your business, it’s important to not only know what makes for a successful business, but also why others fail. Here are a few common mistakes that end up killing far too many small businesses.
1. Not Enough Capital
So you jumped the gun without factoring all those expenses. Well, that’s one of the quickest ways to sink your business. The obvious overhead costs are often the only ones small business owners take into account when planning a startup. However, the day-to-day costs known as the working capital requirement frequently goes unnoticed in the planning phases. Even worse, many business owners are sure so of their new business turning a profit quickly, they knowingly ignore expenses with the assumption they’ll be able to cover it in no time. Capital planning is crucial. If this is an intimidating area for you, try taking some online business courses to help prepare.
2. Under Validated Ideas
Too many entrepreneurs are so sure of their product they don’t even bother getting feedback from potential customers. Jumping in without knowing the needs of your target market is a dangerous endeavor indeed. If an idea isn’t taking hold with potential customers and clients, it’s important to have an escape plan. In other words, ditch the idea before you’re invested in it.
3. Too Small of a Customer Base
While it’s important to find your niche, too small of a customer base will lead to failure. Carve out your niche, but pick one with a solid customer base. If the service you plan to provide is in short order, even better. Don’t be afraid to rework your business model to reflect the market.
4. Growing Pains
There’s also a chance your startup will grow faster than you ever thought possible. While this may seem like a good thing, not handling his growth properly will lead to irritated new clients and the one’s you’ve been working to retain won’t stay very happy either. Ultra-fast growth could lead to more work than you are able to handle and put you way behind on administrative work.
5. Doing More Than you are Capable of
Starting a business on your own means you are responsible for everything. This can put a lot on your plate if there’s not enough in the coffers to hire a support staff. The trick here is knowing when your business has grown to the point you can take on added staff. It can be scary early on when so much about the future of the business remains up in the air. However, trying to do everything is a much easier way to fail. When in doubt, take on the cost of an extra employee or two and get back to running your business instead of running yourself into the ground.
6. Bad Bookkeeping
Keeping good records and staying on top of administrative tasks is a job itself. Too many new business owners don’t take this responsibility seriously in the planning stage and don’t realize how hard it really can be. If you’re not a naturally skilled accountant or administrator, it’s time to look into some online business schools. Granted, an online business associate degree could set you back a couple years, but that’s a lot better than failing in your first year.
Starting a business is a lot of work. However, most new entrepreneurs think the work doesn’t start until the business is off the ground. Not putting the work in beforehand will sink you before you know it. Training is considering a startup. All it takes is an hour or two every night of online business courses to help prepare you to launch your business. You’ll be surprised by how much you didn’t know.