There is no one instruction manual on how to successfully set up a small business. Much of it can only be learnt through personal experience in the field. However, the successes (and failures) of other small businesses can be valuable learning tools that can guide your own small business journey.
From the recurring stories of thousands of small business clients, here are the six biggest mistakes small businesses make when getting set up:
1. Not knowing your market.
Whatever the product or service is that you are intending to sell, do not make the mistake of thinking customers will be straight away beating a path to your door, just because you consider it to be the best thing since sliced bread. You need to fully understand your market, and you must do thorough research on exactly what it is that people are looking for, and how much money they will be prepared to shell out. There are countless examples of a failed small business where the founder thought their idea was so great that it would sell itself.
2. Not having a plan.
It is not necessary to have a detailed 25-page business plan, unless it is part of an investment pitch. However, it is critical that you do have a business plan. If you do not have a plan to follow, this will mean you will have to make lots of decisions in a reactive manner, without perspective. Thus it is crucial to have a plan that sets out your business focus and strategy. You can then consult the plan as a guide and reference. Include in your plan your outlook for time markers such as six months, 12 months, two years, and five years. Your business plan does not have to be set in stone – it can be reviewed and updated along the way as your business grows.
3. Underestimating required effort.
Even the tiniest business takes much effort and resources to run. With a small business, you must create, productise, manufacture, and market your products. It is essential to continually develop to ensure your business keeps up with growing demand and keeps ahead of the competition. As well as selling, you must also stay on top of administration such as bookkeeping, accounting, tax returns, and reams of other paperwork. It is crucial that you do not underestimate the huge amount of effort required. Ensure that you have a grip on how you will handle all these matters – and pay for them, both during the start-up stage and when you get to steady running.
4. Not using experts.
When setting up a business there is a strong propensity to want to do everything by yourself, either to save money or to avoid losing control. However, it is very difficult to look honestly at yourself and make an assessment of your strengths (and weaknesses). Often the best thing a small business owner can do is to be aware of their own weaknesses, and then hire professional people who are strong in those areas such as business website development and how the website is marketed to your audience. When you are honest about what you are not so good at, you will be positioning yourself and your business for the greatest chance of success. It is a given that you cannot be good at absolutely everything, so do be prepared to outsource particular tasks to the experts.
5. Not attending to bookkeeping.
You must pay extra attention to this point, even though it may sound boring. You will be driving blind if you do not have accurate books. You personally may not be the best with numbers, but you must find someone who is. In essence, the success (or failure) of your business is determined by the quality of your financial records. The greater the accuracy of your financial records, the more rapidly you will be able to make informed decisions to correct business mistakes, and you will be able to take advantage of what is working well in the business and thereby make more money.
6. Not being agile.
The running of a small business rarely, if ever, goes exactly to plan. While it is critical to have a clear focus, it is also of key importance to be flexible, as well as aware of what is working well and what is not. It is likely that the business you set out to create will not look much like the business you end up running. Be open to opportunities that may present themselves. Be prepared to reposition your focus on to what it is that is working well. If you are inflexible and hold too tight to your original idea of how things should run, then you are asking to fail. You need to be flexible and follow the money to where it is, not where you want it to be. The fact that your business is small means that you can rapidly adapt as needed by your customers or the market. Take heed of the feedback you receive from your staff, your customers, and your competitors, and be prepared to make necessary changes.