10 Common Mistakes Small Businesses Make and How to Avoid Them

By Walter Nunez & Yhordan Serpentini

Unfortunately, very few start-up businesses make it beyond their 3rd year. Failure is usually down to several identifiable mistakes, which can increase their chances of survival if small business owners are aware of it. When an individual comes up with an idea for a new business, they assume that because he would buy such a product or service, then everyone else will. This may be the case for day-to-day necessities, but this is usually not so for other items. Here are the top 10 common mistakes small businesses make and how to avoid them.

10 Common Mistakes Small Businesses Make, and How to Avoid Them

1. No Market Research

It’s crucial that when you start up, you carefully research the market to check that there is demand at a level that would lead to a sustainable business. Undertaking market research may appear costly and time-consuming, but the effort will pay off.

2. Poor Record-Keeping

Some business people are not born administrators; they feel more comfortable getting out there and doing business. Paperwork is too easy to ignore but can never be forgotten. Sales, purchases, and other expenditures must be carefully documented so you know whether you are making a profit or not. Invoices must be issued on time and chased up promptly if there is a delay in payment. It’s all very well having the sales, but poor record-keeping can hold you back. Having your paperwork in order will also save you time when it comes to your accountant doing your year-end books!

3. Insufficient Capital

When starting, it’s easy to decide what amount is required needed for fixtures and fittings, machinery, and stock. Many new business owners forget about the cash needed to fund day-to-day requirements, money to pay expenses before your customers pay you. This is known as your working capital requirement or cash flow. Small businesses can fail because they have insufficient cash to start off to meet these immediate expenses. If you wish to survive, make sure you set aside enough money to meet all your needs for the first few months.

4. Ineffective or Lack of Marketing

You cannot afford to treat the cost of marketing as an unnecessary expense. A business with no marketing is like waving in the dark – you know you are doing it, but no one else does! There are many ways to promote your business on a small budget; it’s just a case of being inventive and creative. But, whatever you do, don’t assume that people will quickly know you are in business – they won’t unless you tell them.

5. Ignoring Changes in The Market Place

As a small business owner, it’s effortless to get immersed in your business and not see what is happening around you in the marketplace. Always keep your eyes and ears open to what the competition is doing and what your customers want. Don’t get left behind.

6. Owner’s Attitude

Attitude is everything in business. Don’t forget that the real boss in your business is the customer. Running a company may make you feel important, but don’t let this develop into an ‘I am better than you attitude. Do this, and you will quickly chase your customers away.

7. Spending On The Wrong Things

Being in business can be exciting, especially as the cash starts to roll in! However, don’t be tempted to spend it on a new car, a house, or just a good time. If you are to own a successful business, you have to keep some cash back to fund future growth. A company cannot grow without money, so commit to spending business money on the business.

8. Dependent on a Small Number of Customers

Don’t fall into the trap of setting up a business just because one person says they will buy from you every week or month. Setting up and running a business dependent on one customer is not a recipe for success. What happens if, one month after you have spent all your cash to set up your business, that customer says he has changed his mind and has decided to buy elsewhere?

Unless you can find other customers very quickly, you are destined for hardship. Before embarking on a new venture, make sure you have a sufficient number of customers such that if a few go elsewhere, you can continue trading.

9. Growing Too Quickly

Surprisingly, growing too quickly can be a problem. You have to be disciplined enough only to take on work you can handle. If you are tempted to accept too much, you could end up disappointing the new client and your existing ones. Also, don’t underestimate the rapid impact growth can have on your administrative burden. As I mentioned earlier, getting behind on the paperwork can be equally damaging to your business.

10. Trying To Do Everything

Finally, the problem most small business owners have is that everything falls on their plate. Inevitably this is how it’s likely to be initiated when the limited budget means that staff is a luxury, but as the business grows, be aware that you cannot continue to do all tasks. There will come the point when you become inefficient and do not have enough time to complete everything in sufficient detail.

Taking on an extra pair of hands will increase your costs, but you will be surprised at how much time will be saved, allowing you to do what you do best – getting the business in. Take a look at each mistake and make sure that you don’t fall into these traps.

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