Around 60% of small businesses fail within the first five years, so it is worth finding out the key mistakes business owners often make, and how to avoid them. Of course, there are a wide variety of mistakes that vary per industry, but there are definite common culprits for failure to be considered.
The most common mistakes are:
1. No Plan
Every business needs a plan. A business plan keeps you focussed on the right business objectives and opportunities based on your goals, budget and vision. Further, any future investors or partners you may have will want to see that you have a clear and achievable plan.
How to avoid this mistake: Talk to us. We can work with you to create a plan for your business.
2. Finances: Undercharging and Overcharging
Many new businesses try to attract customers by undercutting their prices. This may seem like the place to start but pricing issues become serious as your business matures and unfortunately if they go on for too long and you are not making a sufficient profit, your business will ultimately fail.
How to avoid this mistake: Do your research. Get verification that your prices are competitive with others in your industry and then work out how your products/services are unique. Utilise your industry’s benchmarks for profit margins, as well as your own sales and financial projections from your business plan, to calculate your desired profit margins. You can then price your product or service accordingly. Following this, once you can differentiate your brand and create demand, you can justify higher prices.
3. Not Improving
As with most things in life, continuous improvement is the key to success. If your start-up becomes static, then you will be unable to keep moving forwards and excelling. You need to recognise your successes, celebrate them and then work to build more success on top of them.
How to avoid this mistake: Stay motivated. Always look for ways to improve and pause to celebrate wins, even in the midst of a busy schedule. Creating a culture where success is recognised and prioritised will keep everyone on the right track.
4. Building The Wrong Team
Your employees are a critical asset to your business and represent your brand. Meaning the people you hire need to be aligned with your company mission and values. If the wrong team is built, then it can have a detrimental effect on the dynamics and growth of your business.
How to avoid this mistake: Hire carefully and thoughtfully, outlining clear expectations when you hire employees. Culture fit can often be more important than having a certain skillset, as skills can be learned, and teams work best when everyone working together gets along.
5. No Repeat Business
Repeat business creates a higher degree of predictability, which is ideal for an SME as it means more stable margins and cash.
How to avoid this mistake: Delivering products or services in a retainer or maintenance agreement format will help to do this.
6. Being Afraid of Marketing
Marketing comes in many forms and finding the right form to suit your business and target market is important. Many SMEs make the assumption that business will come to them and that marketing is an unnecessary expense. But this is a grave mistake to make, as you will miss out on building brand awareness, generating leads or creating buzz around your brand, product or service.
How to avoid this mistake: Marketing is an investment, not an expense. Quite simply, if a £2,000 campaign can land you a £20,000 client, surely it is worth the investment. Further, you can start out by utilising free options such as networking and social media and building up as your business grows, so it is not an area to be neglected.
7. Neglecting the Pipeline
If you provide project-based work, your product or service could be high demand one month and low demand the next. When you are in the middle of one project, it is important to work the pipeline by lining up the next project so that there is a continual workload
How to avoid this mistake: It is easier said than done to spread your work out, but it is worth trying to do to ensure your business continues to thrive.
Speak to CBM
Considering these common mistakes, having a coherent business plan for your business is a great place to start to stay on track and soar rather than plummet. If you would like any help with putting together your business plan or advice on how to grow your business, please get in touch! Contact us online using the form on the right or call 01604 420 420.