Setting up a small business is definitely not easy. The road to making a small idea into a big reality is strewn with obstacles and fraught with dangers. But that is only if you do not start your venture off systematically and do not avoid some of the common mistakes made by small business owners. There are of course no fool proof plans that can ensure that you will get things right the first time around. There are so many crucial decisions to make and even one wrong one can set you back and stand in the way of achieving success.
Here are a few of the common mistakes usually made that can spell disaster for small businesses, often leading to shutters being pulled down before the first year is over.
Neglecting the planning process and not setting goals
Planning can be a long and tedious process and most small business owners tend to skip this crucial step. But without a plan in place, you will be groping around in the dark. It is advisable to hire a consultant to structure a business plan that will act like a roadmap for future growth and development. The plan will have marketing goals over say three years, cash inflow and outflows and working capital requirements, product pricing and potential launches.
Most importantly, the plan will have goals and objectives and will be an indicator of where you would want to be in the next three years. With these targets before you it will be easier to decide the specific day to day steps that you should take to be there.
Taking on more than can be handled
It is understandable that you would want to start big and have grandiose plans in place. But can you really afford it? Taking on more than you can handle both in terms of manpower to be employed and financial outlays can land you in big trouble. You can borrow from financial institutions and lenders but keep in mind the regular interest burden that you have to commit to. Initially, focus on your core activities only and diversify only when you have acquired a certain level of stability and have broken even. There is no point in trying to achieve super high levels and quickly burning yourself out.
For example if you have opted for a car service agency, buy or take on lease the basic equipment only and hire technicians that are absolutely necessary. Only when you have generated the required goodwill and business is flowing in should you opt for expensive sophisticated and high tech machinery.
Not outsourcing key functions
Small business owners and start-ups usually do not have the required funds to hire highly paid personnel or install technologically advanced hardware and software to run their businesses. But these are things that you cannot do without. Technology can help you reach your goals faster by enabling quick analysis of all business parameters. Opting to do all operating functions in-house can be a drain on resources that can be better utilised for business growth and development. Under such circumstances, small business owners should outsource key operating functions to professional agencies at affordable rates and without huge investments in infrastructure. Areas that should be considered for outsourcing are bookkeeping functions, payroll processing, filing of taxes and returns and online digital marketing.
Undervaluing products and services
It is not uncommon for business owners to undercut the value of their products and services in an attempt to quickly gain market share and increase brand awareness. Fear of failure and lack of confidence are other reasons for doing so. But this can have an adverse effect in the long run. Consumers often link the price of a product to its quality and creating a negative image of the product is definitely not advisable. Further, once you have undervalued your products, recovering from its effects and bringing the product back to its true worth and market value can be a long and frustrating journey. Fix the true price of your product and go on a advertising blitzkrieg to gain market share from the very beginning.
These are some of the common mistakes that small business owners will do well to avoid from the inception of the venture.