Statistics about success rate of small businesses paint a bit dismal picture. There are very few small business entrepreneurs who make it beyond the third year. Failures are caused by clearly identifiable common mistakes, which, if avoided, can turn the picture much rosy.
Listed below are the common mistakes entrepreneurs must avoid to duck failure.
Mistake No.1
Starting Business without any Market Research:
First-time entrepreneurs in their excitement to start own business assume that products or services they will be offering to market will be easily accepted. But this proves to be the wrong belief in many cases, as entering into any market before doing any research is the surest way to failure.
It is very much essential to carefully research the market and confirm that:
1. There is sufficient demand in the market that can lend sustainability to your business.
2. People will pay the price you expect and enable you to make a decent profit.
3. Competition is not is not too strong.
Mistake No. 2
Poor documentation and record keeping:
Many entrepreneurs underestimate importance of documentation and record keeping in small business. They rely more on verbal communication thinking that paperwork creates hassles and delays.
Purchase, sales and other expenditures need to be properly documented to keep track on profit or loss. Prompt issue of invoices and follow up on receipt of due payments is very essential for running of a business. Having good sales but poor record keeping can disrupt your cash flow.
Orderly paperwork will save your time in assessing tax liabilities and closing year-end books.
Mistake No. 3
Starting Business without Sufficient Capital:
First-time entrepreneurs easily decide about capital amount required for machinery, fixtures, equipments and stocks, but what they overlook is the amount needed to fund day-to-day requirements. It is the amount, termed as ‘Working Capital’, which you pay for expenses much before customers pay you.
Small businesses fail because they don’t make provision for these immediate payments before starting business. You must keep aside enough amount to meet day-to-day needs for the first few months.
Mistake No. 4
Ineffective Marketing and Ignorance of Changes in Market:
Many small business entrepreneurs consider marketing costs as unnecessary expense, which is the biggest misconception. These are essential costs for growth of business. You can promote business on a small budget with little bit of creativity and smart marketing. People won’t quickly know about your business unless you tell them.
Small business entrepreneurs get so much tied up in business that they don’t see what changes are taking place in the market place. Watch your competition closely and respond to customers’ changing needs.
Mistake No. 5
Restricting your Customer Base:
Many entrepreneurs start business just because they get one customer who promises buying everything on regular basis. This approach is definitely a passport to failure. Before starting new venture ensure to have adequate number of customers that will provide sustainability to your business.
Mistake No. 6
Overspending on Luxuries or Comfort:
Entrepreneurs get excited when cash starts flowing in. Don’t spend on new car, a big house or good time. Save cash for uncertainties and to fund future growth.
Remember to keep off from these mistakes in your march towards success.
