Common Business Mistakes New Entrepreneurs Make
While it’s true that mistakes in business present golden opportunities for learning, you want to keep them to a minimum as much as possible. Entrepreneurship is a competitive landscape, and even the smallest error can cost you your business before it even fully takes off. To improve your business’ chances of success, you need to avoid these common mistakes:
• Trying to do everything alone
The initial stages of starting a business involves a lot of hard work that, at times, falls on its founder and owner. While it may be tempting to shoulder all the responsibilities to cut costs or to retain control, you really should consider getting in more people to form a good team. Broadening your perspective with other skilled individuals can improve the business in ways you might not realize on your own. What’s more, the business’ productivity can also increase by cutting your own hours and delegating tasks to the right people.
• Choosing the wrong business structure
New entrepreneurs don’t often think twice about their business’ legal entity if their operations are small. But you should consider forming a limited liability company (LLC) to avoid mixing your personal and business assets, which can put the financial safety of the two at risk. The benefits of an LLC include a more flexible management structure, avoiding double taxation, and customizable ownership options. Additionally, establishing your business as an LLC adds legitimacy that potential partners, clients, and competitors will pick up on.
• Poor financial management
It’s hard to capture financial management in a few sentences, but in a nutshell, you can’t be spending more than you’re making. You should have a close estimate when it comes to your cash inflow and outflow. So, develop a clear understanding of your business’s costs, which includes legal, staffing, insurance, and ongoing production expenses. This can allow you to establish a more accurate and organized budget that you need to stick to in order to turn a profit.
• Neglecting business relationships
Networking and nurturing relationships is crucial to launching and growing a business. For one, connecting with fellow entrepreneurs and professionals is a way to generate usable leads that can fuel growth. It’s also a good opportunity to learn about current business practices and trends that can put you ahead of the competition. You can also find a mentor who can teach you the ways to successfully operate a business. Of course, there’s no one way to network but usually, opportunities can be found in local business gatherings, social or professional networks, or online networking groups within and outside your area.
• Not spending the right amount on marketing
How much you should spend on marketing depends on your business. But as a general recommendation, you should allocate at least 2-5% of your sales revenue to marketing. This budget should include building your brand, website development and maintenance, and of course, social media campaigns. Social media platforms are generally free to use and businesses can successfully utilize the many features on sites like Instagram and Facebook. For instance, Instagram can be used to collaborate with influencers of a particular niche, which can help widen your consumer reach.
• Under-pricing products and services
Under-pricing products and services is a fatal mistake that many new entrepreneurs make. This simply means selling something for less than its actual value, which, as you can probably tell, is not sustainable. Increasing prices can be scary for entrepreneurs — you want to appeal to customers by selling your products at a price they’ll find attractive. However, experts say that it’s better to start high and lower your prices later on instead of the other way around. Remember that the perceived value of your product is affected by your prices. If you price too low, consumers might think what you’re offering is cheap. Price it just right, and they’ll see your product or service as something they need to get their hands on.