10 Costly Mistakes Many Small Business Owners Continue to Make:
There are many mistakes small business owners make that are akin to stepping on the banana peel. As a result they come crashing down.
StatisticBrain in a widely cited statistic reports that over 71% of startups die out or churn within 10 years.
Similarly, the following chart shows business births and deaths between 1999 and 2011.
From the chart above we see that in 1999 nearly 800,000 businesses started, by year end over 700,000 had closed shop. By 2010 the closure rate was nearly equal to startup rate.
Indeed running a small business can be kind of a big deal especially when starting out. For first time entrepreneurs, this sudden realization comes as a shock when they encounter the challenges other small business owners face on an almost daily basis.
This overwhelming discovery can cause confusion and stress plus increase their chances of making major business mistakes which can in turn lead to frustration, business failure or abandonment, if improperly managed.
Some of these challenges entrepreneurs face in running a small business can be overcome with the right information, education, and mentorship.
In this post we shall address 10 major mistakes small business owners make plus how to overcome them and succeed in business, but first
What Constitutes a Small Business?
Businesses are classified as large, medium or small based on size of employees and average annual receipts in some cases. These classifications differ by country or industry.
According to the SBA, a small business is a business that has less than 500 employees or makes less than $1m.
According to OECD micro Enterprises consist of (1-9 employees), small enterprises (10-49 employees), medium-sized enterprises (50-249 employees), large enterprises (250+ employees).
Below is a table showing number of micro enterprises in select countries:
10 Costly Mistakes Many Small Business Owners Make
The following are some of the mistakes ruining many small businesses as we speak.
1. Poor Business Name Ideas
Your business name is so important. Ask Noah Kagan how much it cost to change from Sumome to Appsumo or think of the $872m spent acquiring cars.com
Your business name is your identity, it’s how customers can find you via search, social media, word of mouth, etc. Need company name ideas?
There are tools like business name generators that can help you generate business name ideas in seconds.
If you don’t want a company name generator or store name generator, there are other ways to come up with business name suggestions like Quora, Friends and Family, Facebook Groups, WhatsApp Groups, etc.
2. No Market Survey
You can come up with cute company name ideas plus some, but without a proper market survey it could well be a waste.
In fact you could even get good business name suggestions from a market survey. Plus, a market survey will help you establish or verify need for your product and market availability.
Many entrepreneurs skip this essential step and start businesses on a whim. I’ve fallen into this error with a billing services company I tried starting.
3. Not Fully Understanding their Market
Warren Buffet in one of his famed business investment quotes advices entrepreneurs never to invest in a business they don’t fully understand.
Some people want to become entrepreneurs once they have spare money to spend without trying to master the waters. This is counterproductive. One wrong move and all that money could go down the drain.
4. Taking Unfavorable Loans
Some others after listening to motivational talks are inspired to try entrepreneurship, again with little to no requisite industry knowledge.
This could lead to desperate borrowing from family and friends and even sourcing of funds via loans with extremely unfavorable repayment conditions like exorbitant interest rates and very short tenure.
Such business experiments with borrowed monies hardly end well.
5. Poor/No Understanding of Customer Journey
Customers are the lifeblood of any business enterprise. If you do not fully understand your typical customer’s path to purchase, you’ll be unable to design an effective sales funnel.
With proper understanding of customer journey however, you’re better able to create a user experience or customer experience that fully engages your customer at every touch point, resulting in ideal customer satisfaction.
6. Not Knowing Your Customers
Knowing your customer comes with a lot of benefits. You get to know their likes, dislikes, preferences, location, age group, maybe spending power and other essential demographics information.
This can help you better personalize your products or services which can lead to higher patronage and increased loyalty.
Businesses that miss this miss out.
7. No Website
There are nearly 2b websites (and counting) worldwide with over 3.5b Internet users,1.79b of whom are projected to shop online to the tune of $2.842tr in 2018.
With xennials, millennials, including some Gen Z acquiring more spending power by the hour, companies that do not have a website are missing out.
8. Ignoring the Call of Mobile Commerce
Mobile commerce is both big and still growing in leaps and bounds. Globally, smartphone sales for instance, has been on the increase y-o-y.
As more people use mobile phones more and more of them will conduct business or shopping related activity via phone. Don’t drive them away with your lack of mobile readiness.
9. No Social Media Presence
Social Media should form part of your core marketing strategy. There are billions of people on social media every day, every week and every month.
Ignoring them will be missing out on a lot. Reports say over 65 million businesses are on Facebook or own a Facebook Page.
It’s the digital age, don’t be left out.
10. Small Business Mentality
Every big business was once a small business. While at it, maximize and enjoy your smallness but do not be trapped by the small business mentality.
Think big and plan big with your lean resources. This will influence your business name ideas, planning, marketing, HR, risks and rewards etc.
If you must grow big you need to stop thinking and acting like a perpetual small business.
Conclusion
Business mistakes can be costly. Learning how to identify and mitigate them is a worthy investment of time and effort. Every smart business owner should take note of these business mistakes and take steps to prevent them.