It is okay to make some mistakes when doing business. Thanks to small failures, you can learn to raise the efficiency of the company. It is often enough to change only the strategy. However, some errors are irreversible; they might lead to severe losses or even bankruptcy. You can't afford to make mistakes like this.
Most businesses fail within the first operational year. To prevent this from happening to you, take a look at the common mistakes that should be avoided.
Refusing to Implement New Technologies
It's impossible to deny the vital role that technological innovations play in business development. Besides speeding up the working process significantly through file-sharing services, corporate chats, and dashboards, it's possible to cut costs even more. For example, the company can outsource secondary tasks to remote teams for the sake of focusing on its core activities.
Tech advancements can be intimidating and it takes time to master and understand them. However, the results are worth it. It is not necessary to be a tech-savvy specialist, but you should know more than Office Word basics and how to browse the web. For instance, it might be useful to promote the business on social media or to optimize the website for search engines.
In the long-term, you'll see the results of your efforts. Any investments in tech will pay off fast when done right.
Improper Capitalization
To get ownership and take part in the decision-making process, you must invest some money. Doing so will make you a co-owner, a partner, or a stakeholder.
While some companies are capital intensive, others are capital efficient. Guess which one is better? It is hard to tell. What we can say for sure is that the lack of funds will sooner or later lead to failure. Thus, it is critical to secure capital. You might consider one of the following routes to do so:
- Small business loans
- Long-term loans
- Investors
- Crowdfunding
- Grants
- Other types of financial aid (e.g., help from relatives)
The ways to get money are plentiful nowadays. But if you decide to apply for a loan, plan your budget painstakingly!
Choosing Industries Over Excellent Ideas
Many companies today limit themselves by choosing only one market and staying within the rules of the game. Rookies tend to pick industries with the lowest competition. However, they often ignore the fact that low competition might mean low demand. By focusing on the specific niche, a newbie narrows the scope. The result is a lack of opportunities to expand the business and launch new products or services.
It is hard to predict the industries that will remain in demand in five, ten, or twenty years. The world is dynamically changing. You can try to benefit from selecting an untouched field, but it will only work with a truly genius idea. It is better to come up with a long-term prospect in a niche market. Evaluate business models and strategies of competitors. It could be that the industry itself is not that promising; it's those excellent ideas that make it look successful.
Incorrect Targeting
Many startups target the audiences inaccurately, having no idea who their customer is. In consequence, they try to sell to the wrong people. No matter how universal your business idea is, you should still narrow it down.
Even if it seems that all people might need the product, divide them into separate groups, and target them differently. Personalization and customization are two things that all consumers appreciate as everyone likes feeling special. Market research will help to confirm the target audience as well as it's reaction to your marketing. A/B testing and other tools will help to choose the most efficient strategy.
Doing Business with Friends
It is nothing out of the ordinary that you trust your buddies completely. However, when you see them as friends instead of business partners, it might create some problems. A business is not another game that you play on Friday nights. Example: John goes to work every day, so Dan must find out whether John is ready to give up that job for the sake of the startup. And how about the expected share of equity? Try not to give in to emotion when launching a company. It might harm your relationships, but that is the part where you have to choose what matters more.
Underestimating the Role of Content
When some specialists hear the word "content" or "copywriting," they start laughing, because they don't take it's potential seriously. Many companies value software developers and designers, more than copywriters and content creators. However, it should not be this way: the entire team should work as a clock. All positions are equally important.
Without high-quality texts, you won't obtain high conversion rates and traffic. Such business would be considered dead in the world where search engine optimization matters more than traditional promotion, like street banners or newspaper ads.
If you run a service where companies can order written content or students can buy college research paper, it is especially critical to be aware of what you publish and how. Numerous online tools can show how readable and interesting your content is as well as whether it fits the SEO requirements. Instead of hiring freelance writers for cheap, it is better to have several in-house content managers that work in cooperation with marketing and SEO experts.
Choosing the Wrong Location
Even though most businesses go the online route nowadays, physical location still matters in many cases. An office space may require extra spendings, so choosing an e-business is a cost-saving idea. However, some companies operate in both traditional and digital areas.
A good location usually has such advantages as:
- Higher recognition of the brand name
- Better access to perspective staff
- Beneficial deals on resources, etc.
Quick research will help to detect the hub areas of the preferred industry. Take into account what you plan to sell, how, and the number of people that you plan to hire. Silicon Valley is an example of an excellent location, that benefits many businesses. It is attractive for potential investors, customers, and staff.
Having No Entity
Legal experts recommend registering for LLC or LCC protection. This way, you'll prevent partners from being responsible for anything that goes wrong with the company. In many countries, you won't even be able to operate without a license.
Your idea might be successful, but your business will be closed if it does not correspond to all safety and legal norms. Limited liability companies are the most widespread type of entities, because of the low cost and the simplicity of operation. Therefore, it is a good solution for a startup or a small business.
If you keep in mind these mistakes and try to avoid them, your business will have a good chance to survive. It is possible to launch a company safely. Just make sure that you have enough resources and know your audience well before giving it a try.
