Perhaps you have heard the statistic that 50 percent of new small businesses fail within the first two years of operation. The Small Business Association (SBA) states that the figure is only 30 percent. However, it does jump to 50 percent by five years and nearly two-thirds of small businesses close within 10 years. If you’re just launching a business, consider this a challenge to beat and vow to learn from the business mistakes of those who have gone before you.
Get Serious About a Business Plan
Jumping into business ownership without taking significant time to create a business plan is usually a recipe for disaster. The SBA recommends that every business plan include the following information at a minimum:
- Executive summary that tells the reader what to expect in a succinct manner
- Detailed description of your business
- Analysis of the market your business is entering
- Organizational leadership chart
- Specific strategies to meet sales goals
- How much funding you will need to obtain from other sources to start your business and where you plan to submit funding requests
- Profit and loss projections for the first year of operation and beyond
If you plan to approach investors, know that they won’t take you seriously without a business plan. A business plan also forces you to put planning strategies and goals in writing to help keep you motivated and accountable. You may find that your business takes a different direction or grows faster than you expected. In this case, consider writing a new business plan to reflect the present situation.
Investigate a Market Thoroughly Before Entering It
You may feel so passionate about the products or services your small business will offer that you fail to take the time to research the market to determine if an actual need for them exists. Meeting an unmet need in your community or niche area will be far more profitable than trying to squeeze your business into an area that’s already oversaturated, or where there appears to be little need for what your business has to offer. This is one area where you can avoid business mistakes by taking a logical rather than an emotional approach to starting your new company.
Don’t Start Out with Too Much Debt and Too Little Financing
Perhaps you hesitate to apply for a business loan because you fear a bank will think your new business is too small to take seriously. If so, you may need to consider other types of lenders such as a credit union or one offering merchant or invoice factoring. It’s also a good idea to look into angel investors and low-interest loans through the SBA. Unfortunately, too many new business owners use all of their personal savings and max out their credit cards to finance the business, and then find themselves in a debt load they cannot repay. This is one of the most common and costly business mistakes.