[This article was written by Gabby Rolette.]
Starting anything new is a combination of awful and amazing at the same time. While new experiences are rewarding, challenges can be terribly frustrating. The same holds true for small business owners launching their brands. According to Small Business Administration data, about 30% of new businesses fail within the first two years of being open, and only 50% make it after 5 years. However, if you know where you can potentially fail, small businesses can fight the percentages and achieve success. Below we’ll look at 5 mistakes your small business may be making, and how to avoid them.
#1. You’re Trying to Grow too Big too Fast
Entrepreneurs are ambitious and eager. It’s what drives them to get their businesses started in the first place. However, if a business tries to grow too big too fast, they may not make it very far. For example:
- Overspending on an office space that’s too big for your current needs
- Investing too much money into a website
- Focusing on marketing and advertising without investing in human infrastructure to contact leads and close deals
A smarter approach is to take things slow. For example:
- Instead of depleting all your funds on renting office space, open up a space in your house that can be dedicated to your work or use a virtual office.
- Use free resources like Wix or GoDaddy’s website builder software to create a site on your own.
- Hire a call center to help with lead capture to make sure you’re able to handle marketing generated calls
#2. You’re Not Paying Attention to your Finances
Similar to trying to grow too big too fast, many small business owners fail because they aren’t managing their finances correctly. For example, they may be:
- Spending too much on materials
- Hiring more staff than necessary
- Keeping inaccurate records of financial statements
- Not putting enough money aside for tax purposes or emergencies
- Incorrectly reconciling bank statements, or not reconciling at all
Since many small businesses can’t afford to hire a full time bookkeeper or an accountant in the beginning, responsibility falls on the business owner herself to understand how to manage finances. Fortunately, there are many free resources out there to help. For example, the IRS has a helpful guide for small businesses if you’re not familiar with tax requirements. Additionally, The Service Corps of Retired Executives (SCORE) is a non-profit organization that helps small businesses become successful by holding seminars and workshops. At minimum, your small business should be doing the following tasks each day, week, month, quarter and year:
- Verify your cash position to see exactly what you have on hand each day.
- Maintain and record all business transactions.
- Create separate files or folders for receipts, and sort them accordingly as they are created.
- Review your projected cash flow and set aside enough money to pay your staff, vendors, materials, etc.
- Reconcile your checkbook to verify all transaction entries are correct.
- Analyze inventory to determine what needs to be ordered, and what you have enough of.
- Review tax returns to make sure all documents have the correct figures.
- Look at past due receivables and determine how those should be handled (i.e, giving your customers more time to pay, writing the payments off, etc.).
- File IRS forms like W-2’s for your full-time employees and 1099’s for any independent contractors you might have hired.
#3. You’re Not Researching Your Target Market
The goal of any business is to create a universal service or product that caters to everyone, but it’s not always feasible. I recommend starting with one or a few products that can be marketed to a specific audience, and go from there. For example, a small line of beauty supplies for older women, or a hot new toy for preschoolers.
Before you actually create the product or products your business is centered around, you need a plan. And before you do that, you need to do research. Here are a few examples of how you can research your target audience:
- Do surveys: Google and SurveyMonkey can send surveys to specific audiences
- Ask family and friends for their opinion
- Use Twitter or Facebook to set up a poll
- If you have a “Coming Soon” web page that you’re already marketing, use free survey software there to poll visitors
#4. You’re Not Marketing
Now that you’ve curated the perfect product, you need to let people know about it. Here are 4 ways small businesses can do that on the cheap without breaking the bank:
- Create pages in Yelp, Google Local, and Superpages for people who are searching online for a local business.
- Learn a bit about SEO.
- Spread the word about your business through sponsorships or advertisements in local newspapers and billboards.
- Volunteer in your community to gain a local presence, donate and participate in free giveaways and local fundraisers.
#5. You’re Ignoring Customer Service
New companies need all the new customers they can get. Therefore, it is crucial that those customers are kept happy as cancellations for a small business can be detrimental. When business owners don’t put enough emphasis on providing exceptional customer service, they wind up suffering.
There are many ways to create a successful customer service experience, but the most important aspects are accessibility and efficiency. Are your customers able to reach you without hassle? When they do reach you, are you able to resolve their problem quickly? Small business owners that make their customers jump through hoops to get assistance are business owners that won’t be in business for long. While it’s unlikely that companies are purposely leaving their customers hanging, they are inadvertently sabotaging all of the work they have put into their start up simply by not being available for their customers.
Gabby Rolette is from King of Prussia, Pennsylvania, and manages the marketing department of a small business called Specialty Answering Service. She loves reading and writing, but when she’s not at work you can find her helping animals or spending time with her nieces and nephews.