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Mistakes to Avoid When Opening Your Own Business

Guest post by: MIchael Daley

Article Overview: Starting a business can be rewarding but you need to be aware of these common mistakes. Avoiding them can help you and your business be a success.

Mistakes to Avoid When Opening Your Own Business

Every day there are hundreds if not thousands of sane, rational, normal people like you that take the plunge and start their own business. As they move forward, they do not realize there are traps that have been set to make the journey very perilous.

Avoiding the mistakes in this list can smooth out your path to success.

• Starting a new job rather a new business. Yes, you will have to work in your business but it will also be necessary to work on your business. What this means is that you should want to always find ways to grow the business through efficient operations and increasing sales.
• Being a chef but having no idea how to run a restaurant business. In other words, learn from all your previous jobs. Know everything about your business, not just a specific trade or skill. Pay attention to all the aspects of your past jobs and ask your bosses why they do what they do. A basic "how to run a business" is necessary before you jump in with your competitors.
• Taking on a partner. There are examples of partnerships that do work but in most cases, stay away and try to start the business yourself. Many partnerships dissolve with each partner thinking "I'm doing all the work and you are getting all the pay." If you need help, hire someone.
• Starting a business from the ground up is the cheapest way to go. This is going to cost you your most valuable asset, time. Try to buy an undervalued company and build it up rather than doing all the preliminary planning and using your time to build a customer base. If you can't get financing for a start up, buying an existing business with seller financing is a good alternative.
• Thinking "If I build it, they will come". A successful company depends on the people in the company, the customer development strategy and a robust customer loyalty process. Strive to build a great company as much as you do a great product or service.
• Conservative financial planning. Many startups do not forecast their cash flow needs. When they do forecast cash flow, they plan for either no salary or a livable salary and minimum profits. Aim to build something large and great. Be realistic but plan big and make sure you have the cash to get there.
• Competing on price alone. Want to be a small business start up failure? Then plan to only compete on price. Smaller margins to generate higher sales do not guarantee success. After one year, many startups say "I'm successful because my sales increased 5% monthly". But success in business is about profits! Having smaller sales with higher margins is consistently better than increasing sales but generating almost no profit. Learn about marketing and customer loyalty to earn higher margins.
• Trying to expense your way into a profit. Unless you can produce profitable sales, then no cost cutting policies will help you. You have to spend money to make money. The business should focus on bringing in business and that takes money. Having a plan on utilization of funds and expected results is critical. Whether you hire a salesperson or increase marketing, sales is what drives the small business engine.
• Hiring cheap employees. If you pay peanuts you get monkeys. Get the right people, tell them what you expect from them, and pay them a fair wage. Just don't hire a body. Make sure they are productive and follow your hard working lead.
• Learning only one aspect of your business. Business consists of finance and accounting, sales and marketing, HR, and operations. Learn as much about all of these as you can. You can have managers but you need to inspect what you expect. Make your managers accountable. All of these areas have to work together so do not concentrate on the one or two that you know.
• Not doing trend analyses or measuring anything. Keeping a trend analysis is vital to knowing your business. This can help you with planning for sales seasonality, cash requirements, and marketing campaigns. Measure everything, from sales, to how many people come in your store each day. At a miminum, know the statistics from month to month. Track expenses, sales, and each time a customer makes contact with your business.
• Selling one customer, one time. The key to success is selling the customer once or doing one service and establishing an on-going relationship so you can sell or service that customer again. Long term relationships will generate income at decreasing variable expense levels. Customers will be a profit center because of loyalty and good service, not necessarily from marketing or deep discounts.

Keep your eyes on the road, plan your trip, and then drive your business to success.

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Article Tags: customer, customer loyalty, employees, financial planning, financing, marketing, partnerships, sales, starting a business



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