The sad and unfortunate truth about small businesses is that most of them fail within the first three to five years. A lot of handwork and dedication is needed to be put in start up the business but in order to keep it running, the owner and the employees needed to kick things into high gear to prevent any pitfalls. Yet, now-a-days it is becoming more difficult for small business owners to avoid the dreaded failure.
The sudden failure is usually due to an array of common mistakes that new small businesses make. New small businesses can increase the chances of succeeding by simply learning about as well as taking the steps to avoid the ten most common mistakes that small business make within their first year of opening.
1. Starting Out With Debt
Many small business owners take on the help of big banks and credit card companies to fund the start up of their business. They will use up all of their credit cards and take out big loans from the bank.
These loans may be necessary to make it through some of the start up costs of creating a business but accumulating a large amount of debt is not a good way to get off on the right foot. High monthly payments on the loans along with the bills of starting a business can literally drown the owner in bills. The best thing to do is wait until enough money is saved up to start the business so you will not have to rely on high interest payments and a mountain of debt because this can quickly cause a business to shut down.
2. Poor Record Keeping
Just because someone can start a business does not mean they are good at the administration role of the job. Purchases, sales and all other financial documents should be properly documented to keep track of profits. All invoices and bills should be issued on time to prevent any delays or hold-ups. Organization is key to a successful business.
3. Hiring Unnecessary Employees
Of course, hiring employees is necessary but there is such a thing as a unnecessary employee. Small business should only hire just the right amount of employees because employment taxes, compensation insurance, federal income taxes and other costs needed to be paid.
In addition to the many costs, it is important to comply with all of your states safety regulations to avoid injury to workers. Keeping up with a large amount of employees can be extremely overwhelming to a first year business.
4. Failing To Create A Business Plan
Business plans are extremely beneficial to first year business. These plans help figure out what the initial financing needs are and what possible challenges the business may face such as competition. An organized and well put together business plan should include a break-even and cash flow analysis to help your business not only survive the first year but to last many more years to come.
5. Spending Money On The Wrong Things
Being in a new business is an extremely exciting and thrilling experience, especially when the profits start to flow in.
However, this does not mean it is time to go out and buy unnecessary business and personal items – this is a time to save as much cash as possible to keep the business running smoothly. It is important to keep in mind that the more money that is spent, the more money that is lost if the business fails.
6. Not Handling Press Properly
When it comes to press, there is a good time for it and there is a bad time for it. New business owners should only contact the press when it is close to the business opening and everything has been put together and planned out. This includes the business name, the product, and the slogan. If you contact the press without proper answers to their questions, you come off unprofessional and unprepared which will lure away potential customers.
7. Not Planning To Protect Personal Assets
One of the biggest mistakes first year owners make is not taking proper precautions when it comes to personal assets such as their home mortgages and savings account. The debt that comes along with a new business can greatly endanger the personal items of the owner so it is important to include liability insurance to prevent going completely bankrupt.
8. Trying To Start Up Alone
The process of starting up a business comes with a lot of stress and responsibility – if just one single person is handling everything, they are bound to crack under pressure and the start up will halt completely. With an extra person or business partner the world load will be split in half, drastically decreasing the amount of stress. There may be a decrease in stress but there will be a much needed increase in productivity to help really get the business going.
9. Trying To Force Something That Is Not Working
A product or service may seem to be like a great idea at the time, but as you see the competition and product margin things may seem to be a little displeasing. It is always nice to give things a one time shot, but if things are clearly not working out, there is no reason to try and set something up for failure. It is important to keep in the back of your mind that not all things are meant to be and some things were just not meant to work out in the end.
10. Lack Of Communication
Just like many other things in life, the proper communication is needed to keep things running. Not holding a solid line of communication with employees and other owners makes for a disorganized business. It is also crucial to communicate with critics and customers. Take the time to hear what customers are saying about your business to see what they like and dislike. Listening to critics may be hard, but it helps to make room for improvement where it is needed.
Starting up a business may seem overwhelming, but you are bound to succeed by avoiding the previously listen, ten most common mistakes that first year owners make. Learn from their mistakes and benefit from them.