Hundreds of new businesses are started every day, but only about half survive five years or longer.1 Some problems faced by new businesses stem from the original business concept having been ill-conceived, while other small business startup problems come from common small business mistakes made along the way. Yet other new businesses fail because of external factors such as a deteriorating or unstable economy.
However, many small business startup problems originate from decisions the owner or founder makes, so it’s essential that small business owners understand what can go wrong when starting up a new business. In other words, avoiding the pitfalls of entrepreneurship requires first understanding where the common mistake “landmines” are so that you sidestep them on your path to small business success.
How to Avoid the Mistakes of Entrepreneurship
Below, you’ll find some common problems that startup businesses face and advice on how to avoid them:
Failure to anticipate startup issues.
Starting a business is difficult, time-consuming, and expensive. Small business owners have literally hundreds of decisions to make and nearly as many bills to pay. Everything involved in starting up a business — including choosing a company name, handling all the paperwork, setting up a location, purchasing supplies, and hiring staff — takes time and effort, and it all costs money. So be prepared to work hard, make decisions, and spend carefully with the most common small business mistakes in mind. When you plan prudently, you’re likelier to retain enough money to last you through the startup business stage.
Inadequate consideration of financial issues.
During the period between the decision to start a business and when revenue starts flowing, you must have the money to finance all the necessary startup costs and still cover your personal living expenses. Many entrepreneurs just continue to charge more on their personal credit cards, but that’s an easy way for new business owners to fall into debt as interest mounts. Before you begin executing on your business plan, be sure you gain an accurate picture of how much financial runway you’ll need and whether you have enough funds to see you through these difficult early months. That’s where small business financing comes in. You may need to investigate financing options such as securing a line of credit, applying for a grant, or taking on a small business loan to fund your business’s startup costs.
Insufficient marketing strategy.
A frequent problem facing startup businesses is a lack of marketing strategy that drives sales. From the beginning, you must have a marketing plan that identifies potential customers, makes the benefits of your product visible to those prospects, and motivates them to make a purchase decision. Create a formal marketing plan early and constantly adapt it to what you learn in the marketplace.
Unfavorable physical location.
Another frequent problem facing new businesses is inconvenient or unfavorable physical store locations. If you have a retail business, customers must be able to find your location and visit it easily. Conduct your due diligence before committing to a long-term lease. Traffic patterns can shift, competitors may move close by, and your needs may change as your business takes off, so examine the landscape carefully before signing on the dotted line. Similarly, take care to reevaluate the location every time the lease comes up for renewal and negotiate a shorter-term lease if needed.
Unheeded good advice.
One of the most enlightening aspects of being in business is realizing you don’t have all the answers. Professionals like attorneys and accountants can help you deal with some of the technical aspects of your business. Others, like customers, employees, other businesspeople, and even competitors, can also provide insights into the operation of your business and marketplace. Seeking and listening to good advice can help you avoid the most preventable mistakes common to starting up a small business.
To find and connect with other small business owners who can exchange entrepreneurial advice and ideas, consider joining local small business or trade associations such as the chamber of commerce, the National Federation of Independent Business, Entrepreneurs Organization, or Business Network International. Your industry might have its own dedicated associations, conferences, and online spaces for making connections and exchanging advice. Or you might want to find local businesspeople with similar interests through websites such as Meetup.com. No matter what networking strategy you choose, you’ll benefit from finding like-minded business owners, entrepreneurs, and founders outside your business who understand the challenges you face.
Some problems faced by new businesses are unavoidable — but they’re easier to navigate with support. Lay out your marketing, business, and financial plans; find your perfect location; and consistently solicit useful feedback as you go. You may not avoid all the pitfalls of entrepreneurship, but you can overcome the toughest hurdles if you find the right resources.
And if you’re ready to get your questions answered about small business financing, contact us at Marlin today.
1 U.S. Small Business Administration Office of Advocacy, https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf
This news is provided as a service to you by Marlin Business Services Corp., a nationwide leader in commercial lending solutions for the U.S. small business sector. Marlin’s equipment financing and loan programs are available directly and through third-party vendor programs, including manufacturers, distributors, independent dealers and brokers, to deliver financing and working capital that help build your success.