If you’re an aspiring small business owner, you’re probably worried that you’ll make mistakes when you start your business. The truth is you will. Every entrepreneur inevitably makes mistakes. The key is to do your homework to avoid marking critical errors. Here we will discuss common mistakes that leaders make when starting a business.
Miscalculating Startup Costs
It costs money to start a business. Depending on the business, it may cost a little or a lot, but it always costs something, even if it’s just paying for business licenses and permits. You need to consider every single cost that will come up before you can open for business.
You will probably need at least the following:
- Registering your business and business name
- Business insurance
- Licenses and permits
- A website
- Marketing costs
- A budget for operating and labor costs until you start making money.
Many businesses can start with just these items, which should total less than $2,000, and some businesses can cost significantly more. This can often be a challenge for entrepreneurs, and many do not start businesses because they don’t have the funds. However, there are several financing options for a new business.
- Bank loans: This is a common method but getting approved requires a great business plan and strong credit history.
- SBA-guaranteed loans: The Small Business Administration can act as a guarantor, helping gain bank approval via an SBA-guaranteed loan.
- Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
- Venture capital: Venture capital investors take an ownership stake in exchange for funds, so you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
- Angel investors: Reach out to your business community in search of people interested in investing in early-stage startups in exchange for a stake. Angel investors are always looking for good opportunities.
- Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
- Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
- Personal: Self-fund your business via your savings or the sale of property or other assets.
Not Doing Market Research
You need to know if you’re going to be meeting a market need with your product or service. You can’t just assume that people are going to buy what you offer, so you need to do some market research.
There are two types of research – primary and secondary.
Primary Research
Primary research involves going directly to the source, which is your potential customers. You have to go out and ask people what they think of your product or service and if they would have an interest. If not, what would have to change to make them interested? You’re trying to determine a few things. One, is there a market for your business? Your product or service has to solve a problem that people have, and that they are willing to pay to solve.
Second, you’re trying to find out who has an interest in your product or service. Is it a younger demographic or an older demographic? Is it primarily men or women? Is it people at a certain income level? You also need to know why they will buy your product or service. What would motivate them to buy?
This information will help you to determine where you should market your product or service. For example, if your market is a younger demographic, you should probably focus your marketing on sites like TikTok and Instagram.
The information will also tell you how to market in terms of the message you send. This comes from knowing what will motivate them to buy. By knowing your potential customers, you can personalize your message to show how your product or service meets their needs and wants.
To get all this information, you can start by asking family and friends. You can also gather people to hold a focus group. You can get people to attend by offering them a free sample of your product, or some other small incentive like a gift card. You can also create online surveys to get information from a large, random group of people.
The questions you should ask, aside from demographics, are things like:
- What do they currently buy that’s related to or similar to your product or service?
- What motivates them to buy what they currently buy? What do they like about it?
- What could you do differently to get them to buy from you?
Secondary Research
In comes Google. You’ll need to look up information about your industry and competitors. Start by searching “_____ industry statistics”. You’ll find out the size of the market if it’s growing or declining, and sometimes statistics about who the customers are in terms of demographics and location. Sometimes you’ll also find out what companies are the biggest players in the industry.
Then search for trends in your industry. You’ll find out what types of products are trending and their features, and you’ll often find articles about who those products are trending with. For example, products might be rising in popularity among millennials or Gen Zers. All of this research will give you information not only about your market but what your product design should look like based on what’s trending.
Next, you’ll want to research your competition. You can determine what their strengths are weaknesses are by looking at customer reviews. You can also find out which of their products sell best and who their customers are. You’re looking for a way to give your company an advantage based on what they’re doing and not doing and based on what you’ve learned about your market and their buying motivation.
In Closing
Both of the mistakes we discussed are common, but now that you know what to do, you can avoid those mistakes. You’ll inevitably make others but know that mistakes can always be overcome. Don’t let fear stop you from following your dream, and get your business started!