According to a recent study (by Constant Contact, Inc.), about 59% of business owners believe that running a business today is harder than five years ago. As a result, a good percentage of new businesses fail in the first couple of years.
Despite the ridiculously high percentage of small businesses failure and difficulties of running a small business in today’s economic environment, almost half of all Americans still have entrepreneurial dreams of their own.
To succeed as a newbie entrepreneur, watch out for the following common mistakes that new entrepreneurs make – and tips to overcome them.
1. Setting aside insufficient funds
The main reason most new businesses fail within the first few years is failure to set aside enough cash to support the venture. Most entrepreneurs run out of cash before the business is profitable enough to sustain itself.
To overcome this hurdle, make sure you set aside enough funds to free you up to do months of unpaid work.
2. Doing everything yourself to save money
Although doing most things yourself is a great strategy of cutting down on operational costs, doing EVERYTHING yourself will lead to low productivity and eventual failure. Practically, you can’t bring sufficient expertise in all areas of your business.
To overcome this mistake, let others (experts) handle some of your business functions like accounting, tax returns, web design, social media marketing and other administrative functions. Outsource.
Focus your energies on areas of your business that you are most experienced in. This will not only save you from running yourself to the ground but will also give you a chance to offer sufficient expertise to your business.
3. Lack of a growth strategy
Although every new entrepreneur wants to see their venture grow, most of these entrepreneurs are not prepared for that growth. A good number of small businesses have failed as a result of unplanned expansion.
To overcome this, prepare a growth strategy – have the strategy as early as possible, and make necessary changes to it as the business grows.
4. Poor pricing strategy
Pricing is a very important aspect of any business. Pricing can make or break your business. Most newbie entrepreneurs make the mistake of pricing the products (or services) either too low or too high.
Setting prices too high might put off potential customers while setting the prices too low might make customers deem your products/services as substandard (some prices are too low to be considered seriously).
To come up with prices for your products or services, consider what others are charging and then offer value pricing. Studying what others are charging will help you eliminate the risk of overly overpricing or under pricing your products or services.
5. Being overly optimistic during planning
Although optimism is an important quality found in most entrepreneurs, a good number of these entrepreneurs make a mistake of being overly optimistic during the planning stage. These entrepreneurs underestimate or overestimate some factors during planning which could lead to future business problems.
To overcome this problem, seek objective help from friends or professional consultants.