Common Small Business Start-Up Problems
Hundreds of new businesses
are started every day and unfortunately more than half of them fail within
their first two years. Some businesses fail because the original business
concept was ill conceived and others fail because of external factors
such as a deteriorating economy. However, most businesses fail due to
the decisions that the owner makes.
Here are some common
pitfalls that you should try to avoid.
Starting a business
is difficult, time consuming and expensive. There are literally hundreds
of decisions that must be made and actions to be taken. Everything, including
choosing a name, handling all the paperwork, setting up a location, getting
supplies and staffing take time and effort, probably more time than what
you may think. And everything costs money. So be prepared to work hard,
make decisions, and spend money.
of financial issues.
There is always some
period between the decision to start a business and when revenues start
coming in. During that time, you must have the funds to pay all the startup
costs and cover your normal living expenses. It can be tempting to just
continue to charge more on your credit cards, but ultimately those balances
must be paid and the interest costs can add up. Be sure you have enough
funds to see you through these difficult months.
Once the business
starts, the financial issues continue. If you have a retail business,
sales may start quickly, but getting an initial inventory and keeping
inventory can be costly. Many vendors are reluctant to extend credit to
start-ups and may require payment in advance or upon delivery. Negotiate
terms with your vendors early. If you have a service business, do not
forget to consider how long it may take for your customers to pay you
after you send an invoice. Thirty to sixty days are not uncommon, and
until you get a flow of payments, the anxiety of waiting for a check to
arrive can be difficult.
On an ongoing basis,
you must balance your desire to pay yourself, the operating cash needs
of the business and accumulating funds to grow and expand the business.
Starting a business demonstrates that you have an entrepreneurial spirit
and that ambition often enables you to see additional opportunities.
Most people that start
businesses have a passion about their product or service. Do not let that
passion blind you to the reality that others may not share that passion
for your product or service. 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. Creating a formal
marketing plan early and then constantly adapting it to what you learn
in the marketplace is critical. In addition, you must execute that plan.
It should go without
saying that if you have a retail business, customers must be able to find
your location and visit it easily. It may be tempting to commit to a long-term
lease, but traffic patterns can change, competitors may move close by
and your needs may change. Be sure to consider these factors before you
sign that initial lease and every time it comes up for renewal. If your
business is more service in nature, the location may not be so important,
but parking and access to conveniences may be a factor in recruiting the
right employees and in your personal lifestyle.
Not listening to
The self confidence
it takes to start a business can also hinder your efforts if you are not
careful. One of the most enlightening aspects of being in business is
realizing that you do not have all the answers. Professionals like attorneys
and accountants can help you deal with some of the technical aspects of
your business, but others, like customers, employees, other business people
and even competitors, can also provide insights into the operation of
your business and marketplace.
Truly listening to
a customer tell you what they want from your products and how they want
to interact with your business can provide clues for making improvements
that will help you deal with that customer and others. Employees will
often know more about certain aspects of the business than you do, and
their observations can be valuable. Business people you know, especially
other small business owners, may have already faced many of the issues
you are facing and would be happy to offer ideas. Even your competitors
may be a source of valuable advice. It is surprising how often a casual
conversation can lead to useful ideas and maybe even a way to work together
on certain types of business.