According to the
Small Business Administration, a third of small businesses fail within the
first two years. Over half fail in the first five years. So if you’re thinking
about starting a small business, it pays to take an honest look at yourself,
your business idea, and the marketplace. You can increase the odds that your
business will survive by avoiding three very common mistakes.
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Mistake # 1: Not enough cash. If you’re starting out,
it’s a good idea to accumulate — before you enter the marketplace — a cash
reserve that’s about three times your estimated need. Small businesses often
face down times, when sales aren’t exactly stellar and revenues slow to a
trickle. Also, unforeseen expenses for insurance, staff, buildings,
advertising, taxes (the list goes on and on) can cripple your business and
shut it down before it’s out of the starting block. Extra cash can make the
difference between a survivor and a statistic. A reserve fund provides an
extra bit of cushion to keep the business operating as you work toward the
next sales goal.
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Mistake # 2: Inadequate planning. Building a business is
like building a house. You need a foundation, clear goals, and an
implementation strategy. Where do you want to be a year from now and beyond?
If people built houses with as much foresight as many startup businesses put
into planning, you’d see a lot more folks camping in their basements.
Developing a sound business plan means doing solid research. It means
understanding the marketplace, knowing what sets your product apart, getting
a grip on the costs to implement your plan. An idea is not a business plan.
You need to flesh out the idea and get down to specifics.
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Mistake # 3: Inflexibility. Once you’ve developed your business plan, be
willing to adapt it to changing conditions. More than a few businesses have
started with a great business model, but failed to modify that model when
market conditions evolved. If your customers or competitors change (and they
will over time), don’t be afraid to change with them.
Please place your comments in the section below. Your participation is encouraged and appreciated. Thank you.
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