‘Tis the season. You’re sick of your job and the boss gives you a few days off for good behavior. After too much egg nog and not enough sleep you make the decision of a lifetime.
You start a business.
It’s easy to do. According to Forbes, over 540,000 business are created in the USA every month. Sadly, most of these are destined to fail. If you open a restaurant, your prognosis is especially dire. Concordia University gives a slew of reasons why ninety percent of all restaurants that open this year will fail within the first twelve months.
Want your new business that began as a drunken gleam in your eye to succeed? Beware these pitfalls.
5 Pitfalls to Starting a New Business
1) You invest too little money. The biggest problem in business is that people don’t invest enough cash into making sure the business will succeed. Sure, you have a good idea. Definitely, people are going to want whatever you’re selling. However, you’re going to have to invest capital to make it succeed. There are a myriad of reasons why people don’t visit a business. I’ll give you some of mine:
– Your logo stinks.
– Your website loads slowly.
– Your storefront lacks appeal.
– You dress inappropriately.
– You share religious/political views.
– You don’t carry enough stock.
– Your physical space is in “a bad neighborhood.”
There are countless other reasons I won’t shop at your operation. Most of these can be solved by spending adequate capital. Don’t believe for a moment, though, that spending money is the panacea you’re hoping will cure your lack of experience. While you have to have money in the bank, realize that you’ll need this cash to last for a long, long time. A company that can control overhead but skillfully deploy capital to solve the correct problems is more likely to win.
2) You don’t work from a business plan. Let’s get this out of the way right now: there’s a business plan, and then there’s a business plan. The first one you present to a bank and it’s full of what they want to see: your competitors, your marketplace, your competitive advantage, and your marketing plan. That plan is incredibly formal, incredibly boring to read, and generally uninviting.
The business plan I’m referring to is a different document. It starts off with your organizational chart. Who is responsible for what tasks? It then outlines the daily responsibilities for each person. Finally, it discusses how much money you need to make every day to keep the lights on. If you know exactly what’s at stake every morning when you arrive at your company, you’re more likely to tackle the tasks that are going to ensure your success.
3) You don’t know how to delegate. Here’s what I love about big companies: they have great training programs for their employees. Even fairly rotten companies that have scale have figured out that employees need to know what to do. I can spot a failing business a mile away when I walk in and the owner of the operation is banking on the fact that she’s hired awesome people to do the job.
You need a manual that shows your people how to work. You need to make sure that they have some clue what they need to do next. If you’re wondering why your employees are standing around and you’re doing all the work, don’t yell at them (something I’ve seen in person), look at yourself and ask why you haven’t told them how to do their job better.
4) You’re afraid to market your product/service. When I began creating my financial planning operation, I was with a big company in a training program. One day a fellow trainee whined to me, “I didn’t know this was a marketing job. I signed up to be a financial planner!”
That was his mistake, not the company’s.
EVERY job is a marketing job at its heart. You cannot have a successful business without asking people to buy what you’re selling. Sure, you can look around and find some businesses that seem to spark the interest of the population at large. For a second, assume that this isn’t going to be the case for your business. You’ll need a marketing plan that details how you’re going to find your next customers. Will you attend trade shows? Will you generate buzz via social media? Will you join affinity groups?
As important as a marketing plan may be, it’s nothing without keeping statistics. You’ll need to know how successful your marketing plan will be as you’re spending your hard-earned capital on getting the word out. If it isn’t working, you’ll need to switch directions quickly.
5) You aren’t interested in “the numbers.” I’ve met my share of wonderful entrepreneurs who met their doom when they decided that they were just plain people-people and didn’t care about the books. Whether you’re great at marketing, horrible at math, fantastic at organizational priorities, or absolutely rotten at logistics, your business will generate statistics that show the final score every day you’re in business. Did you win?
If you fail to look, you’re in big trouble. The statistics of your business are your heartbeat. You need to know the health of your operation to make decisions appropriately. Are you growing or dying? Where is “the patient” bleeding? Should you focus on this area personally or delegate it to someone else? Maybe you should hire an outside consultant? It’s difficult to know what to do unless you have numbers at your disposal.
This is certainly not an exhaustive list. There are many pitfalls budding entrepreneurs may find themself stumbling over. But if you focus on your business plan, work from an operations manual that helps you delegate, market your service, focus on the numbers, and invest capital when necessary, you’re more likely to find that successful business you’re hoping to introduce to the world.
Why do you think businesses succeed or fail? Do you have points that could easily be added to this list? Let’s share in the comments below. I’m excited about keeping this conversation going!
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