Starting a business involves hundreds of decisions, so it's inevitable you'll make a few mistakes along the way. But while some mistakes are minor missteps, others can doom your business to failure. Here are seven common startup mistakes that can destroy a startup business and how to avoid them.
- Not doing enough market research. Too many startup entrepreneurs launch their business after polling friends and family about their concept. Of course your spouse and your mom think your idea is great! Don't rely solely on their opinions. Conduct market research using independent sources, such as Census information, industry publications and focus groups of people who fit your target customer profile.
- Ignoring your financials. Every entrepreneur must understand the basic elements of accounting and financial management in order to succeed. It's important to understand what terms like profit margin, overhead and balance sheet mean; to keep a close eye on cash flow; and to have adequate capital (or a source for it) close at hand. Community colleges, SCORE and your local Small Business Development Center can provide courses and training to get you up to speed.
- Doing business on a handshake. Who needs a partnership agreement when you're starting a business with your best friend? You do. Whether you're forming a partnership, borrowing money from your favorite uncle or signing on a Fortune 500 company as a client, legal documents are essential to successful relationships. Agreements should clearly spell out both parties' expectations, detail deliverables and specify what will happen if things go wrong.
- Pricing your product or service incorrectly. Price too high, and you won't get enough customers. Price too low, and you won't make enough profit. Pricing is tricky for a startup, since you only have estimates to go on. However, your industry association can help: They should have information about average prices for your industry and location.
- Falling in love with your idea. Yes, passion for your business is important — even essential. But don't let your passion blind you to hard truths and keep you from making necessary changes. If there is no customer demand for your product, does the problem lie with the customers — or with the product? Be willing to listen to others' input and feedback. Creating an informal advisory board of other business owners, mentors and professionals can help you get a balanced perspective.
- Not investing enough in marketing. When your business is brand-new, the first step is letting people know it exists, and the only way to do that is through marketing. Some start up business owners skimp on marketing, and as a result, never get off the ground. Treat marketing as an investment in your business — rather than an expense. Plus, online advertising, email marketing and social media marketing are so affordable, you'll be surprised how little it costs to get results.
- Going without a business website. Every startup business needs a website, whether you sell products and services online or not. Consumers and B2B buyers alike head online when they're looking for products and services, and if your business doesn’t have an online presence, they won't find you. Your online presence starts with a website. Look for a one-stop website development company that provides web hosting, website design and website maintenance for maximum ease and minimum fuss on your part.
(Disclosure: SCORE is a client of my business.)