We’ve all heard the terrifying statistics about failure rates among startups. Sometimes they say three out of four, sometimes it is four out of five, and sometimes it’s as low as half. Although it is very rare for anyone to offer data to support these claims, we understand that they are intended to warn us about the risks of walking away from a steady paycheck to start a small business.
Still, every Fortune 500 company began as a startup, and no matter the risks, some businesses succeed and thrive in the minefield of the open market. Avoiding the mistakes listed below could help you to be one of those success stories.
First of all it is crucial to understand the difference between an idea and a plan. Just because you are the guy who has finally built the better mousetrap we’ve been looking for the last century or so doesn’t mean that anyone will ever buy it. Taking the time to develop a thorough business plan will prepare you for all of the steps to follow, and trying to get a business off the ground without one will prove somewhere between difficult and impossible. As you’ll see, planning will have a part to play in every step along the way.
Most of us don’t have the option to finance our own startup, nor do we personally know anyone who could. In almost every case a business is started with borrowed money, and as we all learned back in 2008, debt is dangerous. Borrowing too much is one of the most common ways that small business owners sabotage themselves. It leaves them buried in interest payments and sending every penny that comes into the business right out the door again. This means they never have the opportunity to become profitable, and will almost inevitably have to close their doors.
Of course, not borrowing enough money is next on the list of common mistakes. If you aren’t able to restock your inventory after your first month of business, you’re not very likely to be able to pay back that loan no matter how small it is. Before applying for your loans, you’ll need to try to calculate the cost of opening your business, as well as the cost of keeping it open for between six months and a year. This way you’ll be able to keep your doors open for long enough for your income to kick in, but you won’t have borrowed so much that you collapse under the weight of your loan payments.
Many small businesses can operate effectively as sole proprietorships or without employees for quite a while after they open. If this is the case for your business, don’t make the mistake of hiring employees before you need them, or hiring more employees than you actually need. It isn’t difficult to understand the appeal of brining in help, having a comrade in the trenches, and being able to take a day off once in a while.
It would be a huge mistake to think that once the customers are coming in your job is done, or to think that as the owner you won’t have to work with customers directly. Starting a business is a little bit like having a child; later on you’ll be able to take a more hands-off approach, but for the first few years you’re not going to be needed at nearly all times. Just don’t plan on getting a ton of sleep for the first year.
There are countless experts offering advice on marketing strategies, and hiring one of them will likely prevent any silly or obvious mistakes. Paying one of them may or may not be in your budget, but no matter who runs your marketing, be sure that they have an eye for detail. Consumers no longer just chuckle and move on when they see spelling and grammar mistakes in commercial signage. Viral marketing is one thing, seeing your oversight passed around the internet disdainfully can call into question the old trope ‘there’s no such thing as bad publicity.’
Hiring one of those experts can actually be a mistake for your business as well, as it can clean out your operating budget in a hurry. Remember, customers understand that startups and small businesses operate on more tightly restricted budgets. They do not expect you to produce their favorite Super Bowl commercial or compete on the same stage as Microsoft and Apple. What customers want from you are affordable materials that express to them your company culture and brand identity.
Look for affordable options like bulk deals on business cards, inexpensive flyers, and free media like social networks to reach your first customer base. When it comes to in-store branding, don’t feel as though you have to pay thousands of dollars for a PR or commercial décor firm. There was a time when they were the only options for interior signage, but now anyone can use the internet to find their own vinyl banners, digital displays, and customer printed wallpapers. With the aid of websites such as http://www.printmeit.com/. As with any other aspect of your business, the best decision will be one that is well-researched, and knowing your options will save money and stress.
If you aren’t able to adapt to new situations and changing trends, business ownership may not be right for you. New competition, emerging technologies, and shifting markets will pose new challenges for every business in any industry, and the inability to adapt to those changes will always prove fatal.
When Kodak invented the digital camera, they decided that it would be bad for business because they made most of their money off film sales. Their failure to recognize that they had stumbled upon the future of photography cost them everything. Whatever your business model, however strongly you feel about one particular product or service, remaining flexible and adaptable in the face of new ideas and circumstances will help you to stay in business when other competitors fall behind.
Chris Garrett is a freelance writer and marketing professional. He currently writes for MegaPrint, producers of custom wallpaper and other commercial décor.
- Interview with Rahul Powar, Founder & CEO of Apsmart and the creator Shazam (thestartupmag.com)
- Mistakes to Avoid When Exporting Your Brand (thestartupmag.com)
- Managing Risks with Comprehensive Shop Insurance (thestartupmag.com)