The Most Common Small Business Pitfalls
Let’s face it, most small businesses are doomed to failure. No matter what you do, there will always be a risk of a business failure or less-than-expected financial return. Many entrepreneurs are so eager to get started that they neglect business planning and jump in headfirst with little more than a dream and an idea. Business consultants claim that 90% of new businesses will fail. There are many different paths to business success but all business failures share common causes. No one starts out thinking that it will happen to them, but inevitably it does. There are some common pitfalls that can lead to business failure and we are going to discuss the main three culprits. If you address the common reasons for failure up front, you’ll be much less likely to fall victim to them yourself. Let’s discuss each of these in more detail and offer some solid solutions.
Failure 1 – Lack of Knowledge and Planning (Expertise) – It sounds simple, but the number one reason why businesses fail is because the business owner did not take the time to learn his business. Some 71% of firms fail because of poor planning and a lack of specialized knowledge. Keep in mind though, that just because an entrepreneur does not have the knowledge, does not mean the knowledge does not exist. It simply means that entrepreneur failed to take the steps to find it. The first key to survival is to make sure you know what you’re doing when it comes to the business you choose.
Solution 1 – Get the best training you can find and write a solid business plan. The upfront investment in training will be well worth the money you will spend.
Failure 2 – Poor Management (Management) – The second biggest reason small business fail is poor or inexperienced management. Management comes down to two things: competence and experience. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees.
Solution 2 – First, work with an experienced mentor or coach to learn specifically how to manage the business you are getting into. Second, don’t start a business that immediately requires employees; learn to manage yourself first.
Failure 3 – Capital Deficiency (Money) – Everyone wants to be a big shot when they first start out, but before you can swing multi-million dollar credit lines, recognize the fact that your first and foremost goal should be business survival. And business survival means adequate startup cash and ongoing cash flow. Many new business owners severely underestimate what it will take to start up and continue to run their new business – huge mistake! When business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed.
Solution 3 – Choose a business that has very low startup costs and minimal on ging costs. That way, it is not only easier to make the business profitable and successful. Also, if it doesn’t work out you haven’t hurt yourself too badly and you can move on to the next venture with good lessons learned.
