The biggest mistakes small business owners make and how to avoid them
Although it’s true every mistake is an opportunity to learn something new, when you’re a small business owner too many mistakes can ruin your business.
Since nearly 50% of businesses fail after five years (external link) (20% fail in the first year), it’s worth finding out about some of the biggest mistakes small business owners make so you can avoid them.
1. No plan
While there is no need for your plan to be perfect (see No. 2), every business, no matter what size it is, needs a plan. A written plan helps you stay focused on the right customers, opportunities and business objectives. Plus, any investors or partners you bring in will want to see that you have a clear plan to achieve.
How to avoid: Be sure to write down your business plan (a single page is enough). Since things are always fluid in business, be sure to update it whenever there is a change (that will sometimes be every day, week or month). Your plan should also include metrics (external link) so you know how you will measure your success.
2. All plan, no action
Some small business owners spend so much time on the plan trying to make it perfect, that they don’t take the action necessary to propel their business forward.
How to avoid: Change will be your constant companion as a small business owner, so don’t waste your time trying to make your plan perfect. As long as you have a plan written down, get to work.
3. Build the wrong team
Some small businesses hire staff too quickly, wait too long to hire and delegate, and others build the wrong team. Since your employees are a critical asset and will represent your business, take good care to hire people that are aligned with your company’s mission and values.
How to avoid: When it’s time to add employees to your business, be sure you have the systems in place to help them be successful—outline clear expectations, roles and responsibilities for every employee. When you hire, culture fit and attitude can be more important than a particular skill-set, because skills can be learned.
4. Ignore data
Thinking big data is only for big businesses is a big mistake. Data can help you make better decisions for your business and all businesses need to have proper data security and backup.
How to avoid: Make sure you create a data strategy based on the key business questions you need data to answer. Ensure that your data strategy has a solid data security plan as well.
5. Disregard customers
When you have no customers, you have no business. Many small businesses fail to verify that they are providing the products or services that their ideal customers want and need.
How to avoid: Go from thinking to knowing what your customer needs by asking them and conducting thorough market research. Listen carefully to any customer complaints, because those who take the time to tell you about their dissatisfaction are giving your business a gift.
6. Not improving
Every business should look for ways to improve every day, but it’s even more critical for those businesses just starting out. Continuous improvement is the key to ultimate success.
How to avoid: Ensure you and your team don’t get too tied up in the everyday tasks of running your business. Commit to continuous improvement and take action that allows you to do that.
7. Pricing issues
Undercutting your prices to attract customers is a common mistake small business owners make when they are just starting out. But, pricing issues can continue even as your business matures - prices too low to make a sufficient profit, not fully accounting for production costs, scope creep - and unfortunately if they go on too long your business will ultimately fail.
How to avoid: Verify that your pricing is competitive with others in your space and figure out how you can differentiate your products and services to justify higher prices.
8. Connecting with the wrong partners or investors
When it comes to finding the right investors, some small businesses are solely focused on the funding; however, that can be a big mistake. Consider your investors and partners as an extension of your team, so they also need to share the same values and vision for organisation or there will be problems down the road.
How to avoid: Be sure to vet your investors and partners to make sure they are also in sync with how you want to run your business.
9. No celebrations
Pausing to celebrate your wins as a small business can sometimes get pushed to the side because you’re head down making the business work. When it’s all work and no recognition of how far you’ve come, it’s easy to lose passion and purpose.
How to avoid: Create ways to pause and celebrate the ‘wins’ you have as a company even in the midst of a crazy schedule. Not only with this maintain your momentum, but it also helps create a culture where recognition of success is prioritised.
At Hiscox, we want to help your small business thrive. Our blog has many articles you may find relevant and useful as your business grows. But these articles aren’t professional advice. So, to find out more on a subject we cover here, please seek professional assistance.