Starting a business is an invigorating experience that offers the chance to operate under your own set of rules. Even so, the high number of businesses that fail suggests that entrepreneurs aren’t always prepared for the challenges ahead. If you hope to be your own boss in 2016, it’s crucial that you research what other founders have done wrong, and avoid going down the same dangerous paths.
Here are seven mistakes to avoid when starting a new business.
1. Being a PerfectionistStriving for excellence isn’t usually a bad thing. But when it comes to the startup world, perfectionist tendencies can hinder more than help. Not only does waiting to launch mean that you have less funding available, but it also enables another company to scoop your idea.
The pursuit of perfection can be especially problematic in the tech world, where it’s important to stay at the front of the pack. For best results, strive to create a simple, workable version of the product and introduce it to a small audience for testing. The point is to always be improving, not to get it perfect every time.
2. Being InflexibleWhile waiting for your product to be perfect can be a serious mistake, refusing to make any changes can be just as harmful. The truth is that failure is a part of the startup process, and entrepreneurs must often adjust their ideas based on client and investor feedback. If you’re too set in your ways, you might be unwilling to make the tough but necessary changes your product needs to succeed.
The goal is to pay attention to the market. Adapt to potentially lucrative opportunities as they present themselves.
3. Skimping on MarketingNo matter how strong your stand-alone product is, not talking about how great the product is can sink a new business. After all, in today’s crowded marketplace, companies that don’t invest in promoting their products are likely to get lost in the shuffle. And while many of today’s marketing avenues are technically free (e.g. search engine optimization, social media, content marketing), startups still need to find someone knowledgeable to handle these responsibilities.
Don’t be afraid to spend money to build a solid social media presence and otherwise connect with your customer base. Similarly, if you lack the skill to create a responsive, professional-grade website, you should probably hire someone to do the job. As your company ages, and people become more familiar with your products, you can likely reduce your marketing budget to a smaller percentage of gross revenue.
4. Choosing the Wrong NicheSavvy business owners spend considerable time finding an audience for their products. In an effort to avoid competition, startup founders might be tempted to select a customer base that is too narrow. But if you market to a miniscule audience, it doesn’t matter how incredible your goods are—you won’t make much money in the long run.
For best results, research your target audience before launching a business, and determine whether they have the desire—and funds—to purchase your items. The goal is to ensure you have interested users in mind before starting a company.
5. Ignoring Your WeaknessesWhile there’s nothing wrong with having weaknesses, failing to acknowledge your limitations can put your startup at risk. After all, no one can be good at everything, and the fact that you created a great product doesn’t mean you know how to create a business model or sell yourself to potential investors.
If you don’t acknowledge your strengths and weaknesses, you won’t know when it’s necessary to supplement your skill set by taking on other employees. Additionally, you should consider your personality type before starting a business. If you dislike being in the public eye, you will likely want to avoid that sales role or find a partner who enjoys the limelight.
6. Failing to Save MoneyWhile the time it takes a startup to become profitable can vary, few small businesses earn megabucks in their first few years of operation. Moreover, if you’re leaving a full-time job to launch your business, you can expect to earn less than your current salary the first year out. With that in mind, failing to save money before starting a business can be a serious mistake.
To protect your business—and your family—it’s wise to save as much money as possible before quitting your day job. The goal is to give yourself a solid nest egg to live off of while waiting for your new business to get established.
Because funding and revenue are scarce early on, startups operate on a limited budget. In light of this fact, hiring the wrong employees can be a serious—and potentially costly—error. While it’s smart to find people who complement your own skill set, startup founders should look closely at potential recruits before taking them on full-time and make sure they are up to the task.
7. Hiring the Wrong People
When you’re ready to hire someone, be upfront about the type and consistency of potential work. The last thing you want is to hire someone to work 40 hours a week when you only have 20 hours of labor for him or her to complete.
Launching a business is an involved process, and it’s easy for tasks and responsibilities to get lost in the shuffle. Steer clear of the above mistakes to give your business a step up on the competition.
Theresa Todman, Managing Partner/CEO of B&M Financial Management Services, LLC . Theresa specializes in bookkeeping, accounting, QuickBooks solutions, small business tax issues and consulting.