It is often hard for new business owners who venture into an industry with very little or no knowledge about their startup. And just like every other thing that is nurtured to grow, to succeed in business, you must have developed some sort of expertise in your focused industry. There are also a variety of other areas that are required to be attended to make a business succeed as a wrong decision can wreck what you are building. However, we would consider some common pitfalls that can ruin a startup.
If you would love to save your business from making critical mistakes that devoted entrepreneurs make and cause them to fail, then you are committed to success. Here are the common pitfalls that make startups fail:
1. Failure To Plan
If you think planning your business before launching is too tedious, then you are not going to be able to sustain the business. No business will thrive without proper planning of activities, actions, market, etc. You need to create a solid plan that would help your business to scale the next five, ten, twenty years from now.
Three of the top types of plans which your startup must have are financial plan, business plan, and marketing plan. You’d find several guides online to creating a business plan using word documents and PowerPoint templates.
2. Having No Financial Data
For most new business owners, a lot tend to forget how important it is to create a well-documented Profit and Loss statements, and income statements inclusive, which contains all the data of key transactions. They do not see the essence of keeping financial records which can also be very helpful in the development of the business.
3. Undervaluing Products And Services Your Offer
Many find it hard to face competition, have customers or clients turn away, or just lack the confidence in what they are offering that they undervalue their products and services, and place prices that aren’t competent enough for the growth of the business. This move can be very detrimental to the total functioning of your business.
To set up a perfect fee for our services and products, we’d require brainstorming and deep knowledge of your focused market. Do proper research and extensively before kicking off your business and fixing a price point for what you offer.
4. Being Unable To Distinguish Between Cash Flow And Profitability
Some small and medium business owners do not distinguish between profitability and cash flow in their focus to establish a huge customer base for their business. They aim at building their customer base with no structure or plan. It is very crucial to know that cash can quickly be burned, so it is important to bring a balance into profitability and cash flow for healthy business growth.
5. Setting Unrealistic Goals
It is important that you set your goals ahead to give you direction and guide while starting out with your startup. It is however important that you set goals that are not only set ahead but also realistic. Use the SMART goals guide in setting your goals. SMART means S – Specific, M – Measurable, A – Achievable, R – Realistic, T – Time-bound or Timely. These SMART goals help to take your business to your expected future.
6. Delegating Management Of Cash Flow To Accountants
Newbie entrepreneurs may want to consider entrusting their cash flow management into the hands of their assistants of accountants, so as to help them focus on gaining more and increasing sales. But this can repel negatively on your business, as even hardworking assistants can do early payments or over order items. And can affect the financial state of the business badly.
7. Using Old Technology
It is very important as a business person to move with the trend if you’d like to retain and grow your business. Change is inevitable, and every business owner has to deal with that reality. Update your technology. They open doors for new opportunities and also help the effectiveness and efficiency of the startup while also saving money.
8. Not Defining Your Target Market
It is absolutely important that you make a decision on who your target audience would be before starting your business. You should be able to analyze their wants and needs and be strategic on meeting their demands. You’d have to thoroughly research your target market and analyze your focus market.
Know your audience, develop products and services that meet their needs, also consider the state of your target market. When you understand the product or services you are offering perfectly, the needs of the audience that you are meeting, identify how well to approach your customers, and you can predict how they will react to your services after launching out, it literally sets up your business for success.
9. Keeping No Track Of Customers’ Receivables
Many customers will not make payments for receivables until they are pushed to make payments. Typically, customers should make payments within two to four weeks of making a purchase. But a lot of customers think they can extend their payment period based on how convenient they are. Most won’t make a move until they receive a written notice from you. And when your business is not receiving timely payments for products or services rendered to customers, it can affect the survival of your business badly.
10. Spending Too Much Or Too Little
You do not have to make huge investments on a new business. While some industries would demand that you spend so much, most of the other businesses do not require huge spending. Many in fact think that having this huge funds to lavish on a business will produce great financial returns, but no. In fact, such moves could result in huge loss for the business, and cause a breakdown of your company.
On the other hand, some entrepreneurs get frightened to spend so much on their business, and thereby underspend and refuse to allocate needed funding for the financial health of the company. This can potentially reduce the productivity of your startup.
11. Implementing The Wrong Marketing Tactics
Marketing, when done right, will generate positive returns for your startup. It can be in the form of social media, internet, or even word-of-mouth referrals. And when they are wrongly implemented, it can result in a breakdown of your startup.
Through marketing, a business can have a product hype even before being available for the market. There are no rigid rules as regards doing your marketing rightly. As an entrepreneur, you are required to analyze and check what works for your startup. Analyze your market, your customer requirements, and business demands for the right marketing strategy.
12. Little Focus On Your Recruitment Process
Your employees are very crucial to your organization’s growth. If you bring in inefficient and incompetent hands, your business will suffer for it. Hence, it is important to manage your current workforce. And as a new entrepreneur with little to no experience in your industry, it is often advised to get help from professionals for recruiting employees that are qualified for helping your business succeed.
In conclusion, your business relies on your great vision, creativity, and making the right decisions, while also avoiding common pitfalls that can ruin a startup. Hire a few professionals to help your business keep track.