As a new business owner, you’re going to make mistakes. In fact, even super experienced entrepreneurs make mistakes. As wise Mr Albert Einstein once said, “Anyone who has never made a mistake has never tried anything new.”
If you’re thinking of starting your own business, and trying something new, you’ll inevitably make mistakes and run into challenges. Life isn’t perfect after all. But the key thing is to learn from your mistakes, and not to repeat them.
Some of the mistakes will be unique to you and your business, but there are common mistakes that new entrepreneurs make time and time again. Being aware of these potential pitfalls can help you to avoid making those same business mistakes as well.
Why are you becoming a new business owner?
Before you leap into launching your small business, it’s good to check that it’s the right move for you. Entrepreneurship isn’t for everyone. Diving headfirst into business ownership could be a big mistake.
Think about why you want to be a business owner rather than an employee. You may be brilliant at what you do – be that a roofer, hairdresser, accountant or graphic designer for example. But are you good at running a business? Do you have the drive to be a startup founder?
If you’re transitioning from being an employee to being a small business owner for the first time, it’s helpful to work out how long it’ll take you to pay yourself what you have been earning. If that lack of regular income at a certain level isn’t something you can deal with, business ownership probably isn’t for you.
8 common mistakes made by entrepreneurs starting a business
Launching a successful business takes more than a superb business idea. Avoiding some of the biggest mistakes that entrepreneurs often make in their first year of business can set you on the right path. These are the most common mistakes that often cause businesses to fail.
1. Inadequate financial planning
Entrepreneurs underestimate how long it’ll take for money to start appearing in their bank account. There needs to be a reasonable amount of capital in the business to finance the early months where there’s not much money coming in. Be realistic, and stay on top of your business finances from the outset.
How to avoid it: Calculate financial projections for your new business, especially for the first year. This will also be valuable if you need to secure investment or business loans. Some of my clients have been able to negotiate part time hours in their existing full time job whilst building up their own business. That ensures money is coming in during those early months.
2. Spending time on the wrong stuff
People tend to waste time on things that won’t make a big impact on their new business. It’s easy to spend hours colour coding wall charts, fiddling with a logo on Canva, creating a fancy email signature and so on.
You need to be delivering your product or service. That’s how you’ll make money! If you’re not doing that due to a lack of clients, you should be selling. If you haven’t got any leads, you need to be marketing.
How to avoid it: At all times in the first 6 months you need to be either delivering, selling or marketing. If you’re doing the admin instead – stop. That can be outsourced fairly cheaply and easily and shouldn’t be your priority.
3. Trying to do it all yourself
It may be your business, but that doesn’t mean that you should do absolutely everything. Find people that can help you. That could be someone to look after your admin, bookkeeping or customer service for example. It can be seen as an upfront cost, but really it’s an investment in getting your business working as quickly as possible. Even if you’re not ready to hire team members, you can outsource aspects of your business. And don’t fall into the trap of tireless hard work 24/7. You need a work-life balance.
How to avoid it: Identify your weak spots – marketing, finance, sales – and hire people to look after those aspects. A business coach could be your ally, keeping you accountable and focused on the best things to positively impact your business.
4. Working in the wrong environment
Are you working in the right environment? If you’re at home, are you getting distracted by people or domestic jobs? If the dishwasher is absorbing your time and attention rather than your business, it’s time to rethink your workplace! Some people work brilliantly at home, whilst others need a separate environment. That could be a co-working space or your own office, wherever you’re going to do your best work.
How to avoid it: Think about which environment suits you and your personality. Find the workspace that will allow you to function at your best.
5. Inadequate business plan
Have you created a specific, strategic business plan? Not having a business plan is a rookie error. A business plan spells out what you want to do with your business, how you will do it, and what you expect to happen.
It doesn’t need to be super lengthy. Concise and punchy plans are great! But it needs to cover essential elements like your business objectives, ownership structure (e.g. sole owner, partner or LLC), target market, your offering (its USP and any intellectual property that needs protection), sales and marketing plans, and business finances.
How to avoid it: Get planning! Your business needs a written plan for you to follow. My 6 steps to writing a business plan will take you through the process.
6. Poor cashflow management
A whopping 82% of business startup failures are due to problems with cashflow. It’s very easy to burn through a lot of money quickly when you’re starting your own business. But every penny that you spend reduces your profit margin. And if you want your business to become profitable (and why wouldn’t you?), you must monitor your cashflow and, ultimately, your bottom line.
If you need to spend money for your business, say on equipment or vehicles, a business loan that can be paid off over time is worth considering. There are alternatives to dipping into your cashflow.
How to avoid it: Watch your cashflow diligently. Monitor your spend. Make financial projections and track your income and outgoings accordingly. Turn to an expert for help if you need to.
7. Lacking a marketing strategy
You may have noticed that I love a plan, be it a business, financial or marketing plan. That’s because they work! Planning your strategy, and following the roadmap that is your plan, makes such a positive impact on your business.
When you’re starting a business, you need to do your homework. Conducting thorough market research is a key part of this. Without it, you could waste a whole lot of money marketing to the wrong people. Market research helps to identify your target audience, understand your customer needs and define how your product or service will help them.
Defining a marketing strategy for your brand will help you to craft clear communications that will reach the right people. Your marketing plan will explain how, where and when to share those messages.
That may all sound expensive, and it can be. Social media can be the startup’s friend. Identify where your potential customers spend time – LinkedIn, Instagram or TikTok for example – and invest time and money there. And before you spend time developing a sophisticated podcast, start with more simple content like videos and images to engage your target audience.
How to avoid it: Take time to do your homework. Really understand your market and how your brand and offering sits within it. The market’s likely to be competitive. Equipping yourself with a well-researched marketing plan will help you to avoid overspending or talking to people who are never going to buy from you.
8. Sticking rigidly to your plan
Yes, I advise following a plan. But I don’t want you to keep following said plan when circumstances change. Then it becomes the wrong plan. Be prepared to evolve and tweak your plan as you grow and learn. Starting a business will be a steep learning curve and you need to respond to those learnings.
Your business and marketing plans aren’t set in stone. You may realise that your original pricing model isn’t effective. Your actual costs may change, and that needs to be reflected in your prices. It pays to be agile and to respond to new information or situations.
How to avoid it: Monitor and analyse your data regularly and use it to inform your decisions. Understand your sales volumes, competing products or services, and customer feedback for starters. Respond to those valuable insights by tweaking your initial plans – be that your pricing, marketing or product itself. E-commerce business owners have endless data to analyse and inform next steps. Be sure to use it rather than being unwaveringly loyal to your original plan.
Learn from your mistakes (and those made by others)
Starting a new business is as exciting as it is terrifying. Too many start up businesses fail. Preparation and planning is essential, in my opinion. Understanding the most common mistakes made by entrepreneurs before you, will reduce the likelihood of you falling into the same traps. Spending time defining a robust business plan, marketing strategy and plan, financial plan and projections is definitely time well spent.
My blog on 10 big business failures explains where well-known brands went wrong. It’s an interesting read!
Let me help you to write your 90 day business plan. It will set you on the right path for business success.
“[Phil] is very personable and easy to work with. In the GrowthClub – which works to set your business objectives and an action plan for the next 90 days, he works with you to set your actionable objectives. He also adds an extra level of accountability to ensure you achieve these. I would highly recommend working with Phil.”
– Liz Hamlet, Director & Founder at Spark Succeed.
