With a small budget in hand and a big dream in your heart, your trek on the small business highway begins. If you’re like most new business owners, you’ll learn as you go and make plenty of mistakes. It’s to be expected. While many of your foibles will be par for the course and can be chalked up to a good learning experience — some gaffes could cost you big. Think tax penalties or PR nightmares.
Considering that only half of all small businesses survive for more than five years, it should come as no surprise that a strong business foundation is crucial. Without the crux of a well-planned strategy and a full commitment to your mission, your new endeavor is not likely to succeed. Here are three classic mistakes that new small business owners make — and how you can sidestep them on your way toward success.
1. Not Having Paperwork in Order
Part of building a strong foundation at the start of your business is setting up your legal contracts the right way. In fact, it might be the biggest piece of the puzzle. Do you have a business partner? Get your partnership agreement in writing. Develop a detailed business plan and get it on paper. Not only will your business plan help you secure funding, but it will also serve as a practical guide in your first few years of operation.
You should also start thinking early on about how to register as a business entity. Business entity options include sole proprietor, limited liability partnership and corporation. Our platform, CUE Marketplace, has more information about this subject here. Or to compare online software click here.
Or watch this video with simple instructions on how to start and LLC with LegalZoom.
Registering as the wrong type of entity (or failing to register your business at all) can have grave consequences down the line, from tax implications to liability in the event of negligence by a business partner. Suffice it to say that setting up your organization under the proper license is crucial. When in doubt, consult with an attorney or small business financial planner to find out which license is right for you.
2. Lacking a Clear Marketing Plan
Your business plan mustn’t stand alone. Even an impeccable product won’t sell if you don’t know how to talk to your target market. Many businesses make the mistake of thinking they can just make up their marketing as they go along. Don’t do that. You shouldn’t be spending all your money on Instagram ads if your ideal buyer is more likely to respond to a clever email campaign. This is why you must develop a strong marketing plan before you offer your product or service to the public. Parts of a strong marketing funnel include specific buyer personas, research on the channels most commonly used by your target demographic and defined value propositions to help you stand out from competitors.
Your marketing plan will also include your budget and identify several KPIs, or key performance indicators. KPIs inform your budget and overall strategy. Marketing KPIs include things like sales revenue and landing page conversion rates. They let you know if your marketing campaigns are having the desired effect or not. If your KPIs reflect a poor showing, be prepared to pivot your marketing plan as necessary. For instance, if your website conversions are awful, try a site redesign and more conspicuous CTA buttons. Flying by the seat of your pants is no way to market your new business, so don’t try it. Make a plan on day 1.
3. Moving Forward Without Enough Passion
You’ve got startup funding, your marketing plan has been praised by all who see it, and your business license is newly minted. You’re ready to go, right? Maybe. If you’re not truly passionate about your new small business, it’s time to rethink everything. A small business requires round-the-clock effort. You will eat, sleep and shower thinking about your sales and how to improve your brand. If you don’t have the drive, the business will fail. You are the final and key ingredient in small business success.
Many small businesses fail because they tried to capitalize on a trend they didn’t know or care about. Perhaps everyone else was making a photo app so they figured they may as well strike while the iron was hot … and then they got tired and/or bored and the business collapsed. You may see dollar signs because someone else is making money in a certain industry, but you won’t be able to sustain if the passion isn’t there. Don’t go for the most obvious option. Think about what you actually care about and will likely care about in 10 years before you set up shop.
Think you’re ready to embark on the thrilling (if exhausting) journey of opening a new small business? The biggest favor you can do yourself is to conduct a copious amount of research before you begin. Know your market and your customers, and have a contingency budget for when things go wrong. Avoid the classic mistakes of lacking paperwork, forgetting about marketing and going into a business you’re not passionate about. Set yourself up for success, and then buckle up and enjoy the ride!
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