Set Yourself Up For Success
Updated: Jul 8, 2021
Avoiding the 4 most common mistakes when starting a business
When you start a business, the very last thing you want is to fail. As if going out on your own wasn’t nerve wracking enough, the amount of independent business ventures that don’t make it past the first few years can scare off even the most motivated and equipped entrepreneur.
So what are the biggest reasons so many people lose their initial investment, and how can you avoid them? This article will explore the most common factors that bring small business owners to their knees and explain the ways in which you can improve your own strategy.
Being aware of the main culprits and knowing how to avoid them will significantly decrease the risk of failure, with the added bonus of simultaneously preparing you for seeking investment. After all, if anyone is going to look long and hard for leaks that could lead to financial loss, it’s a potential investor.
Reason 1: You’re going in blind
Most people start a business based on something they’re passionate about, not based on market demand. Quitting your day job to realize your longtime dream can feel thrilling, liberating and almost inebriating, and it absolutely should be.
The only problem is that many inexperienced business owners get so caught up in materializing their inner vision, that they skip the first and most important step of the process: market research.
Skimming over your target client profile or ignoring the competitive landscape of your niche is a great way to ensure rapid failure. If you don’t know the nature of your buyer and/or your competitors, you won’t have a clue how to sell your product---no matter how beautiful your storefront looks, or how revolutionary your facial cream is!
Some of the most successful business models in the world today came to be exactly because their founder(s) saw and utilized the gap between supply and demand in a certain market. In a perfect world, you would find that gap before you even conceive of your product. Analyzing your market before launch can help you decipher if and how to move forward with your business idea.
Reason 2: You lack a realistic business plan
This is a big one. Whether you decide to seek a bank loan or private investment, the first thing you’ll be asked for is a clear business plan.
You won’t be able to develop an effective business plan before doing your homework, so make sure to follow the aforementioned rule of diligent research!
A great business plan entails more than an optimistic profit projection or a map of start-up and expansion costs; it should clearly outline actionable steps for the first five years, and present realistic market predictions based on past and current trends. An investor will want you to display a strategy that considers more than just a broad clientele---they’ll want to see a developed target customer profile, along with your unique sales angle.
Anyone who invests money into a business---especially a risky one without a proven sales record---won’t just look at the best case scenario. They’ll want to know what your plan B, C and maybe even D is to protect their investment and turn it into a profit. As with anything, the potential reward must outweigh the risks.
In other words, make sure to have ready solutions for every problem that may arise, research and outline market opportunities, and study both your own and your competitors' advantages and disadvantages. If you feel unsure about any of these things, it’s worth consulting an experienced business strategist to help you develop a professional looking and enticing business plan.
Reason 3: You’re in the wrong place
Regardless if you’re launching an online shop or a physical location, how and where you position your business is absolutely crucial to your success and longevity. Don’t open a gym in a new retail space just because it has great windows or amazing parking space; make sure you’re in the optimal spot to be seen and noticed by your target clientele.
In the same way, don’t waste your entire marketing budget on random door hangers, email blasts or online ads that won’t be seen by the right clients. Again, if you’re not clear on what your ideal business location or ad placement looks like, either take the time to research or find an expert to take it off your hands.
Reason 4: You can’t really afford it
We’ve all heard about the innovative billionaire who started with nothing but a vision and a hammer in his garage, and while such stories are certainly romantic and inspiring, starting a business on a too-narrow budget is one of the most fundamentally flawed moves an entrepreneur can make.
Find out how much money your business operation really requires—not just to function, but to expand and thrive even among the most powerful competitors in your niche. If you scrape together just enough to set up the cheapest version of your vision and only allow enough financial room for it to survive two months without a booming sale, then you’re better off saving that money and rethinking your priorities. Unless you really know your way around business finances, it’s well worth considering advice from an expert who can help you organize the numbers and structure a waterproof plan.
Now that we’ve established the main reasons the majority of businesses fail, it’s time to set yourself up for success! To learn more about our educational webinars and pitch event, click here.
Stay tuned for more weekly articles and an exclusive interview with Shanita Nicholas, Co-Founder and President of LA Black Investors Club, at the end of the month!
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