On this blog, we are big on people starting their own businesses. There are some important reasons:
- The net worth of business owners is 2 ½ times that of non-business owners
- The median income is $70K/year for people who identify as a small business owner in the U.S.
While the doomsday statistics you see on the internet about 80% of small businesses failing are incorrect, there are real risks. Statistics show:
- 33% of businesses fail within 2 years
- 33% of businesses make it 10 years
You definitely want to be in the second group.
If you learn from others’ mistakes, it increases your chances of success. We researched some common blunders of new businesses.
Poor Financial Management – The stereotype of a small business owner stuffing receipts in a shoebox has some truth. Companies that fail to invoice correctly, keep accurate records, and / or pay taxes quickly find themselves in trouble. Start by finding a good accountant to help you with the financials so you can focus on growing your business.
Non-Existent Legal Advice – You need to sit down with a lawyer when you start a business. A lawyer counsels you on issues such as:
- Incorporating to shield your assets
- Protecting your trade secrets
- Developing strong written agreements (i.e. contracts)
Sitting down with a lawyer initially can help you avoid problems later.
Hiring Bad Employees – A lousy employee impacts a small business. Do not hire someone because just because a family member or someone else asks you. You are running a business, not a charitable endeavor. Always:
- Check references and legal status
- Communicate your expectations clearly
- Recognize the results of excellent employees
- Make sure you absolutely need this person
Lack of Customer Service – Good customer service makes or breaks a small business. When you do not have a huge marketing budget, you depend on old-fashioned “word-of-mouth” (and Facebook likes). Strong service means you:
- Address complaints immediately
- Return inquiries by the close of business
Bad Pricing – Related to poor financial management is the issue of bad pricing. You can take steps to eliminate this problem.
- Create a business plan so you know what it takes to make a profit
- Find out what competitors in your market charge
You do not have to be the cheapest provider, but you must price your product or service so that people see value.
Not Living below Your Means – New businesses sometimes take a year or two to make a profit. Three ways to minimize expenses are:
- Work out of a home office (there are often tax benefits)
- Limit borrowing (which limits interest costs)
- Hold off on hiring until you absolutely need new employees
Remember, do not live like a successful business owner until you are a small business owner.
Wanting you to be Successful
Owning a small business allows you to introduce new or improved products and services to the marketplace. It sounds trite, but our economy really needs new firms.
We want our readers to be successful. We want you to start the companies that last. Keep these tips in mind so you improve your odds of success.