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Running a small business is tough, no matter who you are or what your business is. But there are many others who have been in your shoes before, and one of the best things you can do is learn from other entrepreneurs’ mistakes.
All businesses and business owners will fail at some point–and that’s totally okay. Failure makes us stronger and that goes for your business, too. While not all mistakes are avoidable (and many should be embraced), learning from others will help you stay away from the most common ones. Let’s explore the most common small business mistakes below.
Mistake #1: Picking a niche that’s too broad (or too narrow). Are you expecting your small business to attract all U.S. single men under age 25? That’s not realistic (and investors know it). Are you expecting your artisanal matzo ball shop to make millions selling to Orthodox Jewish housewives? Unless you live in Crown Heights, Brooklyn, that’s probably not realistic either. Find a middle ground: a target market small enough to capture, but large enough to generate a reasonable profit. You’ll ofter hear that “niche is nice.” But too niche, well, isn’t.
Mistake #2: Not monitoring your cash flow. Cash flow isn’t sexy, and who wants to look at Excel spreadsheets when they could be doing the fun stuff? Unfortunately, not paying attention can be one of the most serious mistakes you make, and you’ll inevitably discover that there’s more cash flowing out than in. There is no excuse for not staying on top of your small business finances when accounting programs like QuickBooks make it easy to generate at-a-glance snapshots of your business. Not managing cash flow properly is one of the most common small business mistakes–and also one of the most hurtful.
Mistake #3: Not delegating. Your time is valuable, and you don’t want to splurge on the small stuff. Being deeply passionate about your small business is great, but avoid making mistakes by doing everything. The minute you can afford it, offload grunt work (or the stuff you suck at) to an employee, a freelancer, an independent contractor, a virtual assistant, your sister…you get the idea. You have to recognize how valuable your time is and make sure you’re investing it in the right things.
Mistake #4: Not marketing. To newbies, marketing seems like throwing money away. After all, your product or service is awesome, so people will naturally gravitate to it…right? Wrong. Create a marketing plan and devote at least 20 percent of your time to marketing for your small business. Start with free or nearly free options (such as networking, social media and SEO). Then take it up a notch by spending money (such as exhibiting at a trade show, advertising on social media or taking out online ads). Maybe you even have a friend who works in marketing that might be willing to consult for a few hours a week. Wherever you can get help, take it!
Mistake #5: Trying to avoid legal mumbo-jumbo. Deciding between an LLC and an S corporation or whether to be a sole proprietor or incorporate isn’t easy. However, these choices affect everything from the amount of taxes you pay to the investors you can solicit. Avoid this common small business mistake and be sure to trademark your business name and logo as well, or you could find someone else stealing the brand you worked hard to build. Self-help sites like RocketLawyer, Nolo.com and The Company Corporation can get you started; consult an attorney for more help. The more research you do on this subject, the better.
Mistake #6: Not listening to advice. It’s great that you’re passionate about your idea—and sometimes, you need to ignore the naysayers to realize your dream. But if everyone you talk to about your idea has “constructive criticism,” you should consider stopping and listening carefully. Impartial sources like potential customers, investors, lenders or mentors are more likely to be honest than family and friends, so pay particular attention to what they have to say and you can avoid making serious mistakes with your small business.
Mistake #7: Pricing too low. This mistake often afflicts service businesses, where the temptation is to lowball to get your first customers. But that’s a no-win game. Benchmark against similar businesses’ prices, but instead of undercutting them, find a way to distinguish your business so you can charge more—and still make lots of sales. Similar to how you should recognize how valuable your personal time is, you need to make sure you’re doing the same for your business.
Your tenure as a small business owner is going to be filled with ups and downs. “If I knew then what I know now” will be a sentiment you feel often. So, get to know the most common small business mistakes to avoid them and embrace the others–it’s a learning experience, after all, and will only make your business better.