Being your own boss is part of the American dream. Setting your own schedule, working for yourself and reaping your profits are all strong motivators for starting your own business. However, what Uncle Sam doesn’t tell you is that starting your own company is the hardest way to make a living.
One third of all small businesses close after two years and around half close after four years. Daunted? You’re in good company. Many small business owners make the same mistakes during operation. Here are some of the most common ones:
Desperately Holding on to a Business Plan
Business plans are a great way to begin structuring your business. It’ll help you start thinking about what tools you need, what potential hires you might make and how much starting capital you might want to source. However, business plans are better thought of as mental exercises than a stringent rulebook. Markets change, consumers wax and wane and investors’ desires are skittish. You’re going to have to be nimble with your business.
Western Union, run by William Orton, turned down the opportunity to purchase the patent behind the modern telephone system from Alexander Graham Bell. Since Western Union was so content with its market position, it didn’t seriously consider Bell’s invention, which eventually became the single most valuable patent in history. The lesson here is, never be complacent in your business and never be rigid in your thinking.
Spending Too Much Too Soon
One of the most common reasons small businesses fail is that they spend their money poorly. You have to bootstrap and be efficient with your spending, especially during the fledgling stages of your company.
The business area most often overspent on too early? Marketing and sales.Using the power of marketing and sales to kick-start your business will only lead to financial trouble. You’ll have to keep pouring money into these areas to get anything out of them since they are not sustainable. What is sustainable, and pays dividends in the future, is product development. Focus on making your core product as great as possible and then use your remaining money on promotion.
Be targeted. Since you’re creating a product or service, know exactly who you’re selling to. While sometimes surprise customer bases appear, it should be fairly obvious who your demographics are. If you spread yourself too thin, you’ll look unprofessional and you’ll spend a monumental amount of resources trying to capture an ambiguous market.
Mindy Berkson, the creator of Chicago-based consulting group “Lotus Blossom,” began her infertility-consulting firm by marketing to women over 35. This demographic was so broad that it didn’t appeal to anyone. Once she narrowed her market down to professional women’s groups, she then specified even further by targeting overweight women.
By finding a very specific niche, Berkson was able to market more effectively and garner more business. Specifying doesn’t reduce the chance of more business, it just helps you focus your resources.
Not Getting Customer Feedback
The absolute worst pitfall a small business can make is not getting feedback from the people using its services. As famed entrepreneur Eric Ries says, “Not listening is the cardinal sin.”
Even Steve Jobs, notorious for feigning disinterest in the public, relies heavily on customer feedback; that’s how Apple went from marketing the iTouch as a music player to marketing it as an easily accessible gaming platform.
Your current and potential customers are your company’s lifeblood, so treat them with respect. Customer feedback will help you discover new routes of product development that you know people are interested in.
Not Thinking Beta
What, you don’t want to hear about your shortfalls from your customers? You should. Constant customer feedback can give you free quality assurance for your product since users can report bugs and crashes to you directly.
Remember, having an outlet for your users to contact you with is vital in maintaining a positive relationship with your customers.
Treat your potential business like your newborn baby. Take good care of it, watch it grow and be prepared for a ridiculous number of hardships, but never give up! Don’t be flustered when things don’t go your way, just find out what the problem is and see if you can find a solution without spending too much money (or any). Get involved in your industry, make friends and listen to your customers. As long as you’re aware of all potential problems, and the things that led to your successes, your business will be in competent hands.
By Etan Berkowitz