Hundreds of new businesses are started every day, but only about half survive five years or longer.1 Some 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 decisions the owner makes. Here are some common pitfalls you should try to avoid:
Not anticipating start-up issues. Starting a business is difficult, time consuming and expensive. There are literally hundreds of decisions to make. Everything — including choosing a name, handling all the paperwork, setting up a location, purchasing supplies and hiring staff — takes time and effort. And everything costs money. So be prepared to work hard, make decisions and spend.
Inadequate consideration of financial issues. During the period between the decision to start a business and when revenues start flowing, you must have the funds to pay all the start-up 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.
Poor marketing. 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 constantly adapting it to what you learn in the marketplace is critical.
Poor location. 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.
Not listening to 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 business people and even competitors, can also provide insights into the operation of your business and marketplace.
Listening to customers explain what they want from your products and how they want to interact with your business can provide clues for making improvements. 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.
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.