10 Mistakes Made by Small Business Owners - Recipe for Success
Updated: Aug 24, 2019
10 Biggest Mistakes Made by Small Business Owners - Angela Hawke
In life we often say, “hindsight is 20/20” and if one knew that outcome of choices and decisions made in advance it certainly would make life easier to navigate. No truer words can be spoken for business owners. Every decision should be weighted and if the wrong choice is made can be costly, perhaps even put a company out of business. How risky is your decision making? Consider the 10 Biggest Mistakes Made by Small Business Owners to assess your ability to avoid these risk factors.
1. Not Enough Capital - It has been reported that some of the biggest reasons a small business fails is due to lack of cash flow or personal capital. Getting a new business off the ground is not easily or cheap. Just like your favorite cake recipe, you need to have the right ingredients for it to taste right. Individually, the ingredients are good, but when you mix them all together they become great. Just as important, sprinkling in patience and dedication are critical to all new small businesses. It takes time to get to where you are going and making your vision a reality.
As of 2015, 73% of small business owners report being able to access enough capital for their business… meaning that 27% of business owners were not able to access enough capital to operate their business.
*Of the 27% of business owners who could not access capital…
57% said the lack of capital had no effect on their business.
33% said this left them unable to grow their business and expand.
18% reported that a lack of capital forced them to reduce employee size.
15% reported that they were unable to finance increased sales.
12% said they had to reduce employee benefits.
10% said they weren’t able to increase inventory to meet demand.
In 2015, 40% of surveyed business owners used a bank loan to finance their businesses.
But 77% of small business owners who apply for a bank loan from a big bank get rejected.
About 52% of small business owners who apply for a bank loan from a small bank get rejected.
2. Spending Too Much - Maybe it goes hand in hand with not having enough cash flow. As we all know, budgeting is critical to staying afloat, however some business owners put this off until they think they need it. The reality is, this is a foundational piece of getting your small business off the ground. Building a proposed budget to go with your business plan will give insight to what is ahead, but we all know it is not foolproof. Great tools can help make the budgeting process easier. Consider using a budget app or download a budget planner. If you are old school those are easy to find at a local book store too. Researching and forecasting are certainly the best way to predict how these critical dollars will be spent and make it easier to decide on critical tasks especially the ones that are unexpected. Avoid becoming a statistic and the pitfalls that come with owning a small business through a proactive approach. Having a business coach will help you address your line items with the hope that all areas have been covered to prevent failure. Adding an accountant may save you even more money as you go along since they too can hold you accountable. Lastly, don’t fall into the “shiny-trap” where purchasing things that you think you may need become a money stumbling block and are not as important as you may have thought on a whim purchase. Don’t be afraid to return something or discontinue a membership subscription.
3. Lack of Knowledge - Have you done your homework on the industry that you are diving into? Do you know who your competition is? Do you know who your audience is? What is the reason you decided on this industry? What are your goals (financially and professionally)? Knowing how to express these details in your business plan are helpful to deciding how to proceed. As you go through this process you may find that the market is already saturated with your ideas, service, products, etc, which may lead you to explore another industry or market altogether. However, while this may feel like a stab in the gut it will save you the heartache before you get in too deep. Don’t skip the business plan and ask for help along the way. Ask others in business to review what you have on paper and get more than one person who has a history of success to support your vision by playing devil's advocate.
4. Not Adequately Defining the Market - If I told you that I have a phone booth that works for sale and that not only does it make and take calls, but that it is the trend of the new year and everyone will be putting a phone booth in their home, in their businesses, and you’ll see one on every street corner before you know, you would think we were back in the early 1900’s. Did you know that 42% of small businesses fail because there's no market need for their services or products? Wow! That is staggeringly too high not to take the time to understand the needs of the market. Maybe you think that you have something better to offer than an old phone booth that won’t fit inside your purse or pocket and while that may be true, I urge you to take the time to do your research before taking a plunge back in time.
5. Mismanagement - Remember that thing we talked about earlier, “hindsight is 20/20”, this is where avoiding pitfalls before they happen can save your shirt. Many entrepreneurs have had success in previous industries or roles in management and believe that they can apply the same rules to owning their own small business. That may prove to be true, but keep in mind that being your own boss often means wearing all of the hats all of the time. However, if you can afford to hire a staff right out of the gate you must know trust your team like you trust your family without neglecting to stay on top of your role as owner. While there may be business anomalies or one hit wonders that had instant success, I cannot think of a situation where a small business flourished without the guidance of the visionary behind it. Neglectful owners are playing with fire and their empire will likely soon be in a pile of ashes if they are not involved enough with trustworthy players supporting their professional goals with the utmost of integrity and transparency.
6. Not Having Contacts & Services in Place - Are you tapping into your already established network? Or are you branching out into a networking arena that has been uncharted by you? It is tempting to think that your clients love your products and that is enough, but chances are they love the people behind the brand. Relationships are the lifeblood of every small business. Stay in touch with your network and keep building it with warm connections provided by your constituents. Always remember who helped you and offer reward incentives or appreciation notes to encourage their love to flow even more.
7. Ineffective Marketing - One of my favorite TED Talks was none other than How Leaders Inspire Action by Simon Sinek. Let’s face it, business owners need to see action to stay afloat and marketing inspires just that, if it is done well. Simon teaches us that speaking from our WHY is the critical piece to a catalytic movement of getting a message across and enthusiastically motivate people to drive your vision forward. Keep the 3 C’s in mind when sharing your message: Concise, Clear, and Consistent. That is marketing 101 at it’s best. Think about it. If you had your elevator speech prepared today what would it sound like? Would you want what you have? If the answer is no, go back to the drawing board.
8. Failing to Rectify Mistakes - My mantra, “Fail Forward.” As a parent I have encouraged my children that when they fail they can learn from their mistakes. Those are the best mistakes to make. It is inevitable to fail in business and how we handle those failures will often determine the success of the future. Light bulb moment! Aha! No, seriously, Thomas Edison failed at so many of his inventions that today we should all be so grateful that we have light bulbs and electricity to enjoy at the flip of a switch because he kept failing until he got it right. He is quoted, “I have not failed, I have just found 10,000 ways that won’t work.” Finally, I would be remiss if I did not share another of Thomas’s sentiments, “Many of life's failures are people who did not realize how close they were to success when they gave up.” I encourage you to fail and I also recommend that you take time to analyze changes that need to be made before proceeding forward. In fact, I make it a practice to take account of the vision and goals set forth annually and adjust as needed.
9. Refusing to Delegate - There is so much power in delegation yet so often this is where leaders fail to see the art and science of success. It befuddles me beyond belief that leaders hire a team and don’t trust them enough to take the lead on something. Steve Jobs is admired by his outside the box thinking and successes. He shared, “If you want to hire great people and have them stay working for you, you have to let them make decisions and you have to be run by ideas, not hierarchy. The best ideas have to win, otherwise, good people don’t stay.”
10. Time Management - My husband has a favorite quote he shares with teams he coaches, “failure to prepare is preparing to fail.” And he is so right. I am a planner by nature, but I was not always good at it. It only took a couple of missed details that lead me to realize how much I hated to fail in this area. As a business owner, I do as much advanced preparing as possible. In fact, my 12 month calendar is pretty much in shape with only minor details missing. As I get closer to activities and events I begin to hone in on assembling a solid plan of action.
So whether you a building the perfect cake tower or your dream business, get all the ingredients together, in the right order, and bake for perfection. Follow the recipe and your chances are greater to succeed beautifully.
About HLA Consulting
HLA Consulting, located in Huntsville, AL home to NASA and the US Space & Rocket Center, provides high-level strategic communications, public affairs and marketing services to local and national highly recognized firms and organizations. The HLA team takes pride in making businesses great by building a strong reputation, raising awareness and expanding their constituency.
*Citation: Georgia McIntyre what-percentage-of-small-businesses-fail