Starting a new business is an exciting time for anyone. Sometimes business owners will put months, or even years, into a business idea. The start of a new business is full of hope and excitement, and it can also be turbulent when one small mistake can cause significant hardship.
You could have the best idea for a business in the world, but if a single crucial piece is missing, it won’t matter. This list of common mistakes new business owners make can help you avoid crucial missteps. Most new businesses don’t struggle with all of these problems, and often it’s just one or two areas that cause them to struggle or fail.
New businesses might fail for many reasons, and it’s not always the business owner’s fault. These are some of the most common mistakes made when they are just starting.
Common Mistakes When Starting a New Business: Planning & Marketing
No Business Plan, or Inadequate Business Plan
Remember that your new business is more than an excellent service or product. Operating a business takes commitment, coordination, and, most of all, careful planning. Having a clear business plan written out before starting a new business is always an essential step.
Some business owners will make highly detailed business plans and might use their plans to identify strengths, weaknesses, potential room for development, brand identity, and more.
Your business plan doesn’t have to cover every possible area. Try to identify a few key things. First, define the problem that your product or service will solve for consumers. Second, what is your financial situation?
Even if your business plan is just a page long, you should never neglect this document when starting your business. Without it, it will be like starting your business with a blindfold.
Failing to Identify Target Market
Identifying your target market should be part of your business plan, but this step is so important that it deserves its own mention. Your target market is the group of consumers for whom your product or service is most intended. Early on in your business planning, you should devote some time and resources to answering some key questions about your target market. Namely, what problem does your product/service solve? What segment(s) of the population are most affected by that problem? And how can you make your product/service appealing to those individuals?
Every business will have a different target market, and some may find this part of the process easier than others. No matter what your business is, identifying your target market is essential. This gives you a chance to optimize your product or service to suit the needs of your target market. It also gives you a better avenue to drum up interest in your business.
Figuring out your target market also helps narrow the scope of your marketing plan. For instance, suppose you are starting a company that installs home insulation. Your target market would be homeowners with poorly insulated homes. You could then direct a marketing campaign towards people who live in older homes which are less likely to have newer insulation. You could also run seasonal campaigns before the start of summer or winter, when home temperatures can be the most uncomfortable.
Not Having a Marketing Plan
Speaking of a marketing plan: you do have a marketing plan, right? One common mistake new businesses make is a lack of a marketing plan. Knowing your target audience is a critical aspect of a marketing plan.
You also need to identify how you will attract the attention of your target audience. What are the best channels to use (direct marketing, social media, etc.), and how can you convince them of your product’s value? A marketing plan should include plans for securing your first customer, then your first ten customers, your first 100 customers, and so on.
Without a marketing plan, you will struggle to reach the market that needs your product or service. This means your great idea goes to waste, and your hard work won’t pay off to the fullest.
Don’t Underestimate the Workload
Owning a business sounds like a great idea, and in many ways, it is. But if you are launching a new business, ensure you’re comfortable with the work involved. When we dream about starting a new business, we tend to think of all the best parts: being your own boss, seeing your ideas flourish and growing your company through hard work. The flip side is that we tend to overlook how demanding the job can be. Starting a new business is highly demanding, both financially and mentally. This does not need to be a frightening obstacle; if you are prepared for it, it won’t be.
Common Mistakes When Starting a New Business: Finances
Not Exploring All Financing Options
Many new businesses open their doors without exploring all the financial options available. Securing some financing is always a crucial early step. But a little bit of additional funding can be a great cushion to have. New business grants are an often under-explored route for business owners. Loans can help get your business off the ground, but grants are a better option because they don’t need to be repaid. Of course, new business grants are harder to come by than new business loans. Grants.gov has a searchable database of all government grant programs. In addition, many corporations offer corporate grants to help new businesses in their early days.
You can learn more about the different types of small business grants available by reading this article: [Link to article]
Be Careful With Your Initial Funding
Surrounding yourself with the right people can be one of the keys to success. Surrounding yourself with the wrong people can be a big mistake. Many small businesses receive financial support in the beginning, either from a big investor, or a supportive friend or family member. But don’t be afraid to be selective about who you let in. While financial support is welcome, choosing somebody who does not believe in your company, or who might be looking for control, can be harmful.
Many successful business owners and CEOs stress the importance of finding the right financial backers early on. The right individuals can help build confidence, or even provide networking opportunities for you. They will also know when to get out of the way and let your business grow on its own.
Don’t Forget Your Budget
Your business plan should include your initial budget and financial planning. But once your business gets off the ground, you will start making revenue. A common mistake for new businesses is spending too much of their income too quickly.
A lot goes into responsible financial management, starting with how you spend money. Hiring full-time staff too quickly is one mistake we’ve already covered. Other business expenses can be excessive and cause you to lose money faster than you can make.
Proper bookkeeping is another crucial step you can take. This is a step that often gets pushed aside by new businesses, and they believe that a bookkeeper can be added later. But the earlier you start keeping track of every expense and every piece of income, the better you will be later on. The earlier you start, the better your financial habits will be down the road. We have an article on 5 (Simple) Steps to Creating Your Small Business Budget that can help you!
Figure Out Your Own Pay
Don’t forget that you must also be paid as the business owner. Some new business owners pay themselves too little, while others award themselves too much of the company’s profit and don’t leave enough capital to grow the business.
Most experts recommend setting your pay as a percentage of the company’s total profits. This prevents you from getting too greedy with your personal income and gives you even more incentive to focus on company growth. The more the company makes, the greater your cut will be.
Common Mistakes When Starting a New Business: Company Structure
Failure to File Paperwork
Running a successful business isn’t about thinking outside the box or clever marketing strategies, but it’s an essential first step from a legal perspective. Registering your business is an important first step from a legal perspective.
Without the proper paperwork, you won’t be able to conduct much of your business operations. Other paperwork, like your articles of incorporation if you plan to establish your business as a corporation, can be necessary as well.
Another overlooked aspect of starting a business is potential trademarks. Not every business will need to file for trademarks, but it’s always worth it to have this conversation. If you have intellectual property that you wish to protect, filing a trademark is often worth it. Your company’s name, slogan, logo, or product and service names are examples of items you may consider trademarking.
Some cost-benefit analysis may be required to determine if filing for trademarks is a good idea. There are escalating fees involved in trademark applications, but the reward for a successful application is better stability and freedom for your business. In the U.S., all trademarks are filed with the U.S. Patent and Trademark Office.
Don’t Be Afraid to Seek Help
Chances are, you’ve never run your own business before. If you have, you probably already know the importance of good help. But if you haven’t been in charge of a business before, there’s likely a lot you don’t know. Even worse, you don’t know what you don’t know. Many new business owners believe they can and should do everything themselves. But this can leave them unequipped to deal with unforeseen obstacles quickly and often.
Bring experienced, knowledgeable executives who can handle some of the business’s more industry-specific or day-to-day aspects. This lets you focus more on the big picture and what you do best for your business.
Discover resources for small black owned businesses here.
Don’t Rush to Hire Employees if You Don’t Need To
Budgets can be tight when your new business is just starting, and adding full-time, salaried workers to the budget can often break new businesses. Eventually, you would love to add a full-time staff around you. But when you’re just starting, it’s often easier to hire part-time workers, subcontractors, and freelancers to handle specific tasks. Any task that doesn’t require full-time attention early on can (and should) be filled by part-time workers.
Executive positions should always be filled with trusted, knowledgeable partners. But you will be better off waiting to fill other staff positions. Plus, having a more robust financial framework will make it easier for you to pay your full-time staff competitive wages.
To learn more about this topic, read this article: How to Know When it’s Time to Hire for Your Business.
Sign Contracts
Speaking of other employees, another common mistake new businesses make is the avoidance of contracts. Some overlook it entirely, while others might think contracts are unnecessary or an awkward subject to discuss. But contracts create clarity in the company structure and working relationships. When everyone’s role is spelled out, it becomes much easier for each team member to perform. This can also help to identify potential areas of need for your new company.
Common Mistakes When Starting a New Business: Launch
You Have to Walk Before You Can Run
Last but certainly not least is the age-old wisdom of not getting ahead of yourself. One of the most common problems for new businesses is launching too early. This is understandable. When you have a great business idea and start putting the pieces together, it’s easy to get excited. It’s natural to want to open your business to the public as quickly as possible. But if you launch before all the pieces are in place, your eagerness will quickly turn into disappointment.
Most of the time, the backend of the business needs to be refined. Most new businesses clearly know their products, services, and marketing voice. But things like payment structures, company structure, attracting and maintaining a customer base, and a business growth strategy are often overlooked.
Resources for New Businesses
No one understands the needs of new businesses and startups better than other new businesses. That’s just part of why Blueacorn is so committed to helping new small businesses succeed. Our work started in 2020 as a response to the hardships faced by many small businesses during the COVID-19 pandemic.
Blueacorn continues to help small businesses and startups with financial services and resources. We have helped hundreds of thousands of small businesses secure PPP loans. As our company grows, we look forward to building new ways to help others succeed