Top 10 Mistakes Small Businesses Make
Failure to accumulate sufficient cash before starting a business
Many entrepreneurs rely almost completely on debt to start their business. Having too much debt can cripple the growth of a business. A study by Robert Scott at Monmouth University showed
that for every $1,000 increase in credit card debt that a business has, the risk of business failure increases by 2.2%. Accumulating a pool of cash to invest may delay the business opening, or reduce the size of the business initially, but it may also dramatically improve chances of long term success.
Failure to seek assistance from objective business advisors
Entrepreneurs need an objective ear or “sounding board” to help evaluate a business idea. It is very difficult to be thoroughly objective about your idea or product. Ask for help from a trusted third party but be careful that the person(s) you share the idea with will maintain complete confidentiality. Small Business Development Centers were created for the purpose of providing assistance to the entrepreneur or small business owner. Take advantage of their free counseling services. SBDC office locations can be found on the U.S. Small Business Administration website.
Failure to plan thoroughly before starting a business
Every new business is likely to face “surprises” but thorough planning will help keep unexpected occurrences to a minimum. Planning should include a well researched written business plan, carefully developed financial projections, an understanding of all legal requirements, a marketing strategy and a process for monitoring and managing performance of the business.
Failure to correctly estimate start up costs and working capital needs
Entrepreneurs must carefully research the start up costs for starting and operating the business. Lack of adequate working capital is a major cause of business failure. A pool of money must be available to pay business expenses until the business income is adequate to cover the cost of operation.
Failure to assemble a strong team of advisors
Entrepreneurs and small business owners need a strong team of advisors. The team might include an attorney, an accountant, someone with expertise in marketing, a lender and other individuals with business ownership or management experience. The team might also include counselors at a Small Business Development Center or with the Service Corps of Retired Executives. Both organizations provide free business management counseling and training and are funded in part by the U.S. Small Business Administration. For locations, check the SBA website.
Failure to manage cash flow effectively
Cash is king but cash flow is the life blood of a business. Careful monitoring and management of cash flow is critical for any business but especially for a new business. Many small business owners believe a large volume of sales will generate a substantial cash flow but that is not always the case. Successful small business owners have a basic understanding of financial management.
Failure to monitor business performance on a frequent basis
There are many measures of business performance. Small business owners should understand the measures and how to use them to make sound business decisions. Relying on annual tax filings
alone to measure success is not good business!
Failure to listen to customers
Opening the doors of a new business is only the first step in a successful operation. Customers must learn about the business and be motivated to purchase goods and services from the
business and the sooner the better! Successful business owners seek and respond to customer feedback.
Failure to plan, monitor and track marketing efforts
Once a market strategy has been developed and implementation begins, it is critical to track the success of each advertising and marketing effort. Anyone can learn the basic process of
monitoring and tracking marketing efforts. The business owner can use the information to be sure the marketing and advertising dollars are being spent wisely.
Failure to adapt to changing conditions
Business operation is not static. Many things impact business operation and one of the primary advantages small businesses have over their larger competitors is their ability to quickly make needed changes. Unfortunately, some business owners will not alter their initial business practices. Refusing to adapt to a changing business environment in a timely fashion could cause
the business to fail.
All counselors at the Grayson County College SBDC are Certified Business Development Specialists and are available to assist with research, feasibility studies, business plan preparation and development of financial projections. Our start up seminar is free of charge and all counseling services are also free of charge. Give us a call today at (903) 463-8787 or Contact Us via email to schedule an appointment.