5 Small-Business Mistakes and How to Avoid Them
The small business, for many, is a big dream, and one that really can come true. However, wishing on a star isn’t going to cut it, and if you want your small business to be one of the 50% that survives past the five-year mark, a laser-sharp focus on error avoidance will be a much more effective use of your thinking time.
Yep! We all make mistakes, and that’s fine. But it’s a bit less forgivable to make mistakes that others have made before you, which is why we want to paint some of them on your radar.
Now we’re going to share some of the most common small-business mistakes with you—five of them, in fact—so you can log them in the memory bank, or your smartphone’s Not-to-Do list, and stay well clear of them as you nurture your enterprise towards greatness.
Avoid These 5 Mistakes and Keep Your Business Healthy
Mistake #1: Planning to Fail
Yes, really! One of the most common mistakes that small-business owners make is planning to fail, but they don’t do it deliberately, or even consciously, oh no. All it takes to succeed with a plan to fail, is not to plan at all—and that’s the mistake. Just ask Benjamin Franklin.
If the plans for your business are all in your head, they’re sharing cranial real estate with a million other residents, all jostling for your attention. So to give your business the firm direction it needs, and to help others (institutions that might provide you with much-needed capital, for instance) to see what you’re about, get them out of your head and into written form, pronto.
Start with a one-page, general strategy, using straightforward terminology that everyone can understand, and including the following elements:
- A mission statement: This sets out the exact purpose of your business
- A vision statement: This defines what you want your enterprise to achieve in the future
- Your value proposition: Defines how your business will stand out from the competition
- Target market: What you know about your customers, and what you still need to discover
- Financial goals: How your strategy will make money, and how you will finance your strategy
- Internal operations: What internal competencies do you have or need?
- External partners: Which business partnerships are essential to the success of your strategy?
- Resources: What do you need to execute your strategy successfully?
- Competition and risks: Who are your main competitors and what internal or external risks do you need to mitigate?
And yes, you really can fit all that on one page, although you might want to use a small font. The point is, this written strategy is your start point, and you’ll be surprised just how sharply it can focus you, your staff, and your stakeholders on what your business must achieve, and what it needs to do so.
Mistake #2: Human Resource Hiccups
A small business can comprise a staff of a couple hundred, or it might just be you on your ownsome. Regardless of which end of the spectrum your business lies at, you want to avoid making mistakes with the hiring of help and the delegation of work.
There are a few different hiring hiccups that can cost your business time, money, and customer loyalty. Some of the most common are as follows:
- Leaving it too late to increase human resources
- Rushing the recruitment and hiring process
- Hiring the wrong people
- Not engaging any extra help at all
- Failing to outsource or delegate processes and tasks
Let’s take a quick look at each of these mistakes in a bit more detail.
Leaving it Too Late
If your business is in the startup phase, you might be reluctant to bring extra help on board, especially as funds are often scarce in the early stages of an enterprise. On the other hand though, if you leave recruiting until you reach situation critical, you’re very likely to make another of the mistakes on our list—rushing the recruitment process.
Remember that one-page business strategy we were discussing? Keep the internal operations section in mind and plan to bring resources on board well before it becomes an urgent need.
More than 20% of businesses fail because they don’t have the right team in place. That’s a classic pitfall when decision-makers expedite the recruitment and hiring process, prompted by a sense of urgency to fill vacancies.
However, rushed recruiting is a sure path to yet another of the mistakes listed here—hiring the wrong people. Are you starting to see a compounding sequence of problems here?
If you do find it necessary to get extra hands on deck quickly, consider using a temp agency to get some short-term help initially, or perhaps outsourcing some work to an external service provider instead.
Hiring the Wrong People
Apart from leaving recruiting too late and rushing the process, this mistake can also result from over-attention to the technical requirements of a job, because like many adages, the one that goes “hire for attitude, train for skill” contains more than a grain of truth.
While you might be looking for highly skilled people to save on the training budget, in the early stages of growth, you probably can’t afford to hire the best people on the labor market. Even if you can, your business will suffer if you don’t hire those who can gel with your business team and its culture.
Refusing to Engage Extra Help
Again, this is one of the mistakes more commonly made by smaller enterprises. Are you the owner of many hats in your business? Have your colleagues or employees got a hat collection too? If so, remember this: when you (and your key team members) are always working in the business, you will never have time to work on the business and therefore, deliver on that one-page strategy.
Reluctance to Outsource or Delegate
Even if you can’t afford to increase the size of your small-business workforce, we exist in an age when you don’t need to shoulder ever-increasing burdens of labor. To do so will only run you and your enterprise, slowly but surely, into the ground.
Ever heard of virtual assistants (VAs) for example? We’re not talking about the digital kind like Siri or Cortana, but real-life people who will take on your business admin tasks for a very reasonable price.
VAs can free-up time for you and your core business team to focus on adding value, growing your company, and even putting the life back into that work-life balance.
Mistake #3: Misadventures in Market Evaluation
Your product or service might be the greatest imaginable, but imagination can be vivid, and far removed from reality. When we were children, some of us believed there were monsters in our bedroom closets, until many nights of peaceful, uninterrupted sleep later, we were convinced otherwise.
Of course, there is absolutely nothing wrong with imaginative products or services. They enable the most successful companies to surge ahead of the rest. However, many a good business idea fell by the wayside because the market too, was more imagined than real.
Too many small businesses have launched into being, or have thrust a new product or service onto an unsuspecting market, in the mistaken belief that it would yield sales in abundance. The mistake is often realized too late, when those sales fail to materialize and the product, service, or even the business, fades into memory, leaving only dreams of what might have been.
Make Reality a Priority
The short ode to broken business dreams we presented above comes with a moral—and it goes like this:
However great your product or service is, and however keen you are to get it to market, make sure there is a market, and that it will be receptive to what you are planning to offer.
Investment in solid market research will pay dividends, and if you can, it may be best to hire a professional agency to investigate markets on your behalf. If that’s too much of a stretch, then cast around on social media channels, talk to other, non-competing businesses with similar products or services, and get some surveys out to prospective customer groups.
Mistake #4: Blissful Ignorance to Business Performance
The next mistake on our not-to-do list is one still made by enterprises of all sizes, although it is probably more prevalent among small businesses. To introduce it, here’s another well-worn pearl of wisdom for you…
“If you don’t measure it, you can’t improve it.”
That one comes from the father of management thinking, Peter Drucker, and just like Founding Father Franklin’s words about planning to fail, it is a business truth.
Many businesses still operate without focused methods of performance measurement, whether relating to sales, marketing, supply, or logistics and last mile delivery. It’s a mistake, just as it would be a mistake to drive your car while wearing a blindfold.
If You Want to Get Ahead, Get a Dashboard
You can easily avoid the mistake of unmeasured progress, and you don’t need a car to do so, although a dashboard can be helpful. All you need to do is take time to develop some metrics focused on critical elements of business performance, and select a handful to be your key performance indicators (KPIs).
By using a KPI dashboard to track this small number of measurements periodically (daily, weekly, whatever makes the most sense), you will know where performance is looking good, and where to focus improvement efforts.
Better still, use benchmarking first, to learn how your business’ performance compares with that of others in your sector, and then develop KPIs that will track performance in the strongest and weakest of your core competencies.
After all, if you want your business to be at the head of the pack, you need to know how hard you must work to get there, and what you need to work on. Then, with appropriate measurements in place, you can start to manage it actively.
Mistake #5: Thinking You Know Your Customers
We’ve already looked at how imagination, while healthy when directed in the right way, is no substitute for due diligence when it comes to knowing your market.
However, there is another mistake involving the subjective versus the objective, and it’s one that small businesses make a little further down the line, when an established customer base and steady profits lull decision-makers into a false sense of security.
What do you know about your customers? Do you understand what their priorities and preferences are? Do you know what they wish you would do more of, and what they could care less about? Do you know… or do you think you know? There is a world of difference between the two.
Know… It Rhymes with Grow
Many, many, small-business management teams think they know their customers. Some are so confident about it that they never actually take steps to test their understanding, which often enough, is a long way from perfect. The result is often a one-size-fits-all service offering, which over time falls out of touch with customer preferences.
Eventually, the disconnection leads to attrition, as savvier competitors start picking away at the customer base, armed with better intelligence about their needs and desires.
Don’t let this mistake affect your small business. Existing customers should never be taken for granted. Keep in touch with them. Canvas them. Talk to them on social media. Offer them incentives to tell you what they love about your products and service—and what they don’t like.
Above all, take action on the feedback received, and then ask again what you can do better. Identify those customers that generate the most profit, and give them a different tier of service than the rest. Work with those that generate least profit, and incentivize them to generate more.
Thinking is sinking. Knowing is growing. OK, that’s not an adage; we just made it up, but it seems to be true, and it’s easy to remember, don’t you know? Your customers are your business, so make sure they know it, and that they know that you know it… also that you know, that they know… well, you know what we mean.
You Can’t Say We Didn’t Warn You
Forewarned is forearmed (adage or cliché?) and now you have some unadulterated knowledge about five common mistakes that small businesses make all the time, and how to avoid them. If some of them resonate, or seem eerily similar to situations arising in your business, don’t panic, but do act to address them.
If you haven’t fallen into any of these traps yet, or your business is soon to launch, you might wish to keep this article somewhere prominent. Perhaps give it a quick look over every now and again to remind yourself and your team that there might be icebergs ahead, but your ship is not yet too big to turn and avoid them.