Although many people are venturing into entrepreneurship in the United States, some established businesses don’t survive the test of time and shut down every year. Data from the U.S. Bureau of Labor Statistics (BLS) shows that nearly 20% of newly opened businesses fail within their initial two years of operation, while about 45% don’t last beyond the first five years.
As a new entrepreneur, it is common and expected for you to feel motivated to succeed. But if you fail to be realistic and recognize some of the pitfalls you will encounter, any obstacle that comes your way will make it harder for your business to push through successfully.
Below, we share the ten costly mistakes you should avoid when starting out as an entrepreneur. Knowing them beforehand will enable you to avoid making similar mistakes.
Failure to Develop a Solid Business Plan
A realistic and solid business plan forms the basis of any successful business. It is where you outline your achievable business goals, how the company will meet them, and potential problems and solutions. The business plan also helps you to determine the costs and inputs required for the business and outlines the strategies to implement and timelines to meet.
Starting a business without a basic plan simply means you are preparing to fail. Again, you risk failure if you establish a business plan and fail to follow it by doubling your expenditures or changing your strategies. Unless you highlight some overwhelming inaccuracies in the plan, it will be best to stick with it.
Poor Internet Presence, Location, and Marketing
In the digital era, your social media strength and location on the internet are as crucial as your business’s physical location in a shopping district. A solid online presence enhances your business visibility and availability, enabling more potential customers to find you easily.
The same applies to marketing. You should align your marketing efforts with the target audience and what they want. In the same way, giant billboards may not work for an internet-based company; online ads may not go well with a heavy-construction business.
Adopting the latest technology may seem costly to some entrepreneurs, who may avoid it. But technology greatly pays off by streamlining operations and improving growth, productivity, profitability, and efficiency. For instance, using an offline communication tool can save you a lot of time, effort, and money.
Insufficient Financial Preparation
It is common for an entrepreneur to ignore financial planning and underestimate the amount of capital needed to get the business up and running. This often leads to insufficient financing or cash squeeze to attain the desired goals. You can avoid such problems by formulating financial projections for the new business. That way, you can easily secure investments and adequate financing.
Anticipating Overnight Success
You shouldn’t enter a business expecting to earn loads and loads of money overnight. Starting and building a profitable business requires hard work and perseverance through numerous hurdles. Remember that owning a business is about accumulating a lot of money and being passionate about what you do.
Doing Everything by Yourself
One of the biggest mistakes you can make as a new entrepreneur is assuming that you can handle and run your new business independently without seeking opinions or guidance from successful people in the industry. You need to work closely with trustworthy, experienced advisors to deliberate about your online business ideas, progress, strategy, and challenges.
Failing to Define Your Target Audience and Market
Most entrepreneurs make the mistake of failing to take the time to define and understand their target customers and market. But you may not know or gauge if you are on the right track if you don’t constantly receive feedback from prospective or current customers. You might have built a unique and outstanding product, but that doesn’t necessarily translate into a successful business.
Expanding Too Fast
As you realize some success, you may easily assume that the growth will last forever and be tempted to expand your business too rapidly. If your growth period was only temporary, you might end up stuck with a whole bunch of new stuff without the funds to cover them. Besides, due to expanding the business too rapidly, you may fail to conduct the same level of research, planning, and strategizing, leading to financial draining that can sink the entire enterprise.
Remaining too Rigid
After establishing the business and gaining a customer base, avoid becoming complacent. It would be best to assess the business market to determine when it is time to change your plan. By staying on top of the key trends, you will know the best way to adjust your strategy to remain competitive.
Quitting Your Full-time Job Immediately
Keep in mind that no business starts to churn profits immediately after it is established. Many budding entrepreneurs make the mistake of resigning from their jobs to focus on running their businesses. But it takes time for a business to start making meaningful profits. Hence you need an alternative source of income to meet your personal expenses.
As you venture into entrepreneurship, you might want to ensure that you get everything right from the beginning to keep your business afloat for the longest time. The good thing is that you now know the mistakes to avoid and where to put the most effort.