Four in ten small businesses in the UK fail within the first five years. Imagine ploughing five years into a company, only for it not to succeed in the end. That’s pretty tragic.
To help you avoid going through the same stress, here are a list of some of the catastrophic mistakes small businesses make…
1. Choosing the wrong business
A lack of market research or a misunderstanding of the target market can lead people to start small businesses in areas where the market is already saturated, or there just are not enough customers. It goes without saying that a single nursery in a small village is going to do well, but three nurseries in the same small village are likely to struggle when they’re sharing limited children between them. Think carefully before you launch. Make sure there is a real need for whatever it is you’re providing and make sure that your knowledge of the industry is strong.
2. Not having a plan
It is vital that you have a plan to guide you as you grow your business. What is it you want to do? Where do you want to go? How are you planning to get there? You might think you have all of these things worked out in your head, but it is vital that you write this down and address is regularly. You need to have clearly defined goals and a cleverly constructed plan about how you’re going to reach your targets. Naturally, there will be unplanned obstacles along the way, and your plan will need to be changed accordingly.
3. Waiting too long to hire
You might think you can handle everything. You might think nobody can do it like you can. You’re probably wrong. Spend some time and hire someone who is just as smart and tenacious as you and let them help you. You’ll burn out if you don’t. Nobody works to their best ability when they are burnt out. You also run the risk of hiring someone on the basis that you just need anyone to give you a hand, and those kinds of recruitment campaigns never work out well.
4. Relying on friends and family
Instead of recruiting people you don’t know, you could hire your friends and family. It sounds like such a great idea in theory, but it’s not. As much as they love you, your friends and family are much more likely to skive at work, tell you they can’t come in and call you out if you try to tell them off. When you go from family member or friend to boss, people will start treating you differently. Bosses have to be willing to sever relations with people who don’t work correctly for them. It is tough to do that if that when your personal relationship transcends a working one.
5. Bad leadership
It might be you, or it might be someone you have hired, but bad leadership can be detrimental to a small business. It comes in all shapes and sizes, from leaders who want to be friends with everyone and enforce zero discipline, to managers who create mini dictatorships and have everyone running scared. Your leaders should be empowering, inspiring individuals who make your employees better and more productive. People should want to work for them.
6. Poor money management
Whatever you do, do not spend every penny you make. Take a wage from your profits, but reinvest the rest of it into your company, even if that means leaving extra money in a bank account for a rainy day. Additionally, don’t go into scarcity mode and keep all your money in the business without re-investing it to grow. Many businesses, in particular, startups, will be too scared to spend money to grow in case that they have a slower month next month or in fear of a client cancelling. But this mindset can prevent you from ever developing and will keep your business stuck in the same place.
7. Cutting corners
You might be able to make your own website. Maybe you have a flair for marketing and can manage this yourself. Perhaps you are a social media whizz, and your platforms are thriving. However, if you can’t do any of these things, then there is no shame in admitting it. Don’t plod along managing stuff you have no knowledge about to try and save money. If you cut corners, it will have a detrimental effect on your business in the long run. You wouldn’t let an amateur submit your tax returns on your behalf, would you? It’s better to bite the bullet and invest in people who know what they’re doing rather than be of detriment to yourself.
Need help funding your new business? Check out these new ways of funding a small business in 2017…