It takes some degree of comfort with risk to even launch a small business in the first place. To manage your business well over the years, you must balance minimizing risks to your company with introducing a product or service to the marketplace. You must also price the product or service you offer to be profitable while tapping into an unmet consumer demand at the same time.
All of this can be an incredible challenge. It’s so challenging, in fact, that the Small Business Administration (SBA) reports a failure rate of 80 percent in the first 18 months after a new business opens. The good news for you as an entrepreneur is that you can study and learn from the mistakes that lead to the small business failures of those who have gone before you.
Unrealistic Marketing Strategy
Not raising enough capital for marketing or underestimating how much time and financial commitment an effective marketing campaign requires are both common reasons for small business failure. Business owners also tend to overestimate how many new customers they will attract simply by launching a new company.
Working with a marketing expert to assess needs before the official launch is the best way to ensure that you will have customers waiting for you when you do open the business. This will also help you to have a realistic sense of how much money you need to put aside for marketing purposes.
Not Enough Working Capital
Most business owners, even those operating a company for the first time, know how much money they need for payroll, rent, utilities, vendor payments, and other typical costs associated with running a business. They are often less aware of how much revenue the company is earning from the sale of products or services. Knowing what’s going out, but not what’s coming in can quickly lead to small business failure.
One problem with generating revenue is that new business owners price their products or services too low to undercut the competition. That may get customers in the door, but it won’t keep them there if the price doesn’t stay low. New and smaller companies can also struggle to find affordable wholesale pricing that would allow them to price lower without cutting into their profit margin quite as much.
Poor Management and Lack of Planning
The person with most seniority in a company isn’t always the best one for a management position. However, this is often how it happens with new companies. It’s better to take the time to hire someone with the skills and personality necessary to do the job well. Additionally, the failure to create a business plan according to SBA recommendations can sink a business in a hurry.
Another pitfall is that new business owners try to do everything on their own from accounting to payroll to hiring. They quickly over-extend themselves and may give up on the business as a result.
Let Us Help You Avoid These Common Mistakes
Whether you have just started your business or want to sell it soon, Aura Wealth Advisors can assist you in making financially sound choices. Please contact us or call 573-634-4006 to learn more about our services for business owners.