More new businesses were launched in 2021 and 2022 than ever before. Owning a small business lets you go after what matters most to you in a meaningful and impactful way, but it’s also a scary venture for new entrepreneurs.
Beginning the process with an idea of the common pitfalls to avoid is crucial to your small business’s success — let’s explore the most common small business mistakes and discuss how you can avoid making them.
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- Not Having a Business Plan
An important aspect of creating a sustainable business that stands out is writing a solid business plan. A strategic business plan helps create momentum, putting you in the best position to succeed because you have a clear, well-researched idea.
Running a small business comes with enough challenges — you want to take every advantage you can get, and writing a business plan can help.
However, many new small businesses start their venture without considering the big picture. They begin without understanding financials, logistics, business models, market trends, etc., and that lack of understanding costs time, effort, and money when things go wrong.
Along with a business plan, many small businesses don’t have a mission statement to turn to when things get tough.
You can avoid this common small business mistake by creating a plan to help spot the gaps you need to fill and identify what still needs work.
A business plan answers questions like:
- How will you manufacture your products?
- Who will you sell to?
- Will you ship manually or with a 3PL?
- Not Thinking About Business Credit and Finance
Small business owners often only look at the bottom line — how much they brought in this month, last month, etc. However, they might also think about further in the future, like what’s in store for them in the next five years.
What they aren’t always thinking about is what they can do today to avoid mistakes in the future and ensure their business is set up for financial success.
For example, are you ready to expand if it becomes necessary? Are those funds readily available to you? Do you have any business credit? What about a business credit card? How much can you get on a business line of credit or loan?
If you don’t already have a line of credit or card that is open, paid on time, and active, you likely won’t have access to the funds you need at the most crucial times. You shouldn’t think about building business credit down the road — you should start building it right now.
Here are some tips to keep your small business going in the right direction:
- Clean up your personal credit
- Establish business lines of credit and increase them each year
- Save 10-20% of your profits, so you don’t pay last year’s taxes using this year’s profits
Related: How to Get Started Bookkeeping
- Not Handling Industry Changes
Every small business owner knows about the Blockbuster vs. Netflix battle, who won, and why. However, many small business owners still refuse to update their practices in line with industry changes — even if they know they need to do so and are losing business.
Here’s how you can ensure that you handle change correctly in a fast, well-thought-out way:
- Think about how you send and receive funds: How are you handling exchanging funds from vendor to customer — checks, cash, debit cards? How do your competitors send and receive funds? If they’re all doing something different, you might want to, too.
- Keep current on industry trends: If you want to remain profitable, your business needs to stay relevant — what’s happening today in your industry? Are there new business methods, new technologies, or changes in your customer base? Visiting industry trade shows is a great way to learn what’s new, what’s out, and who’s getting the best results.
- Overhaul your advertising and marketing: If you’re still taking out ads in the newspaper and doing coupon clippers, you need to pay attention to this section — if you’re not using Google, Facebook, etc., to market your business, you’re going to lose to your competition. Get involved on social media, take it seriously, and know that your online reviews matter.
- Not Hiring Quality Employees
Have you ever had angry customers because something wasn’t done right, bad reviews because of poor customer service, or felt stressed because your employees were underperforming? Unfortunately, the wrong employees make owning a small business even more difficult.
Follow these tips to hire and train quality employees:
- Resumes and cover letters: Don’t glance over resumes; go through them with a fine-tooth comb. Does your candidate show commitment, or do they hop jobs every six months? You also want to require a cover letter — this shows you their communication skills and thought process, which is invaluable when interacting with customers.
- Training: Your onboarding and training programs will determine the efficiency of your employees. These programs show two things: new hires understand your expectations, and they understand their value to your company because you provide high-quality training.
- Skills: Don’t just look for skills in your industry — someone that has worked in your industry for years may be stuck in their ways and unwilling to change. Sometimes, people from outside your industry can be easier to train in the ways you want to operate your small business.
Did you know that hiring job seekers who have past barriers to employment can earn your business thousands in tax credits? Learn more here.
- Not Hiring Any Help
Not every small business owner hires the wrong employees — some of them think they must run their business alone. However, they don’t think about opportunity cost; your time is as valuable (if not more) than anything else.
If you bootstrapped your own business, you probably did it by yourself, from web design to marketing and everything in between.
However, this presents a problem: doing everything yourself is extremely time-consuming; it wastes valuable time you could be spending building business relationships, coming up with new ideas, or even spending it with your family.
A crucial business decision you must make is to hire someone when you need help, whether it’s a co-founder, freelance, or employee. They can help you grow your business, get your tasks finished efficiently, and, most importantly, give you your time back.
Related: Best Credit Cards for Startups