If you're trying to start your own small business, chances are you've already made a few mistakes. Some mistakes are insignificant and won't make a difference to your success, but some will set you back enormously, and could even end your business for good.
This list will identify five of the most common mistakes made by small businesses and will help you to avoid making those mistakes yourself.
1. Taking Out Loans
A loan or capital is frequently required for starting a business. Few individuals have the funds to start a business from the ground up, so taking a loan out is not necessarily a bad thing. But there are a lot of pitfalls in the process of requesting a loan. For instance, if you're attempting to get a loan from a bank, but don't have enough credit built up, your request may be denied and you'll be set back even further.
A large loan can also come back to bite you later, when you feel like you've finally achieved financial success. Interest rates and irresponsible payment of fees can add up over time and might cost you your business if you aren't able to pay up. Thinking creatively is necessary for getting around this problem. Something like pairing with a factoring company, depending on their invoice factoring rates, could be the solution you need to gaining immediate capital for building your business.
2. Hiring Too Slowly
One big mistake a small business can make is to think that, because they're smaller, they don't need to hire as many employees as quickly as other companies. But this is an error that could end up being the difference between a successful company and one that never gets off the ground. It's essential to hire hands to help you do the work before the work needs to be done. You'll end up swamped, having to handle everything yourself, or overloading the few employees you do have with too much work.
Of course, you may not be able to afford hiring employees right off the bat. You may need to outsource work, like advertising or shipping processes, to other companies while you get your start. If you have friends or family that are willing to help out, take advantage of their generosity, and don't assume you can handle it all on your own. Burnout is a big risk of starting a business and should be avoided at all costs.
3. Neglecting Market Research
An essential first step of starting a business that is often neglected is market research. It may seem to you like you already know your client base or audience, but this assumption can land you in a lot of trouble. In order to compete in your field, it's necessary to put in the work yourself or hire a good market research team to find out exactly who you need to target. Get a focus group to give honest feedback and really pay attention to the data you gather.
4. Underestimating Your Worth
Being overly confident can really hurt a small business, but being unconfident can hurt just as much. It may seem like your product isn't worth as much as others on the market, or you might think it'll set your business apart by being cheaper than your competitors', but this can open you up to a lot of frustration down the road. You won't feel rewarded for your hard work, and you'll be giving a bad impression to your customers by undervaluing what you have to offer.
Try to honestly set your price points by using the available data. Being accurate will make your products and services worth what you charge for them, and will help you to avoid the resentment of being consistently underpaid for what you offer.
There's a lot more to know before starting your own business, but identifying common pitfalls is a good place to start. Knowing what not to do will help you to avoid common mistakes moving forward.