When it comes to running a small business, what you don’t do is just as important as what you do. Most business owners—or worse, former owners—could tell you about big mistakes they could have avoided if they’d only known about them in advance. The four below are among the most common.
Lack of business knowledge
A common error people make is starting a company because they have a passion for something but they do not know very much about running a business. Unfortunately, their passion may not carry them through the ups and downs that lie ahead.
You may want to consider taking a few business classes, and if you are thinking of running anything larger than a one-person company or a partnership, you might want to consider getting an MBA. An MBA can also be useful if you have few connections because it offers excellent networking opportunities. You can usually take out student loans from a private lender to cover the cost of tuition and other expenses.
No marketing plan
Another common error is failing to plan for marketing. People talk to their friends and family members who seem enthusiastic about the idea, and because they love the idea and so do the people they know, they assume the general public will as well. It’s important to make sure you have a solid plan in place.
Market research is important. You should research your competition and consider what makes your idea unique as well as who your potential customer base is. Social media is an important marketing tool, and you need to have a strategy in this area as well in more traditional marketing approaches.
Not talking to experts
When it comes to such issues as business formation, contracts, taxes, payroll and data security, it’s worth paying for expert advice and assistance. This is true even if you have that MBA, but being a business expert doesn’t also make you a legal expert. These are also all situations in which spending some money now can save you a great deal of money later.
You’ll have a firm foundation to build on, which is much easier than trying to work backwards and sort out a legal or financial mess months or years later. Another plus of taking care of all of this up front is that when the time comes later that you perhaps need to consult someone on short notice on one of these issues, you have already established a relationship with legal, financial and technical experts who can help you.
No contingency plans
You always hear that you should think positive and plan for success, so what could possibly be wrong with doing exactly that? Nothing, as long as you make sure that you also plan for the obstacles that might arise along the way. One reason many experts advise writing a business plan even if you aren’t planning to seek investors or loans is because it can force you to consider various scenarios and how you will approach them.
What happens if six months or a year passes and you’re still in the red? How long can you stay afloat without making any significant money? What happens if your business partner wants out? Thinking about what could go wrong can also point you toward important safeguards.
For example, depending on the nature of your business, you may want to purchase various types of insurance. This can protect not just against loss of equipment but may provide security if you have to close your doors for certain reasons or protect you from certain types of liability.
