When starting out in a small business, every decision you make impacts the company and its revenue. It’s tempting to make decisions that will have short term effects that boost sales, but will this leave you in the lurch when times get tough. Knowing when to say “yes” and when to say “no” is a skill that is honed with time and experience. Understanding the most common mistakes a small business makes now will help prevent your small business from encountering the same issues later.
Not getting everything in writing
It may be tempting to take someone’s word when you are first starting your small business. Maybe you went into business with a friend or family member and sealed the agreement with a handshake. Sure, this may seem like an arrangement that you can trust, but what if you have a disagreement? What do you fall back on?
All partnerships need to be set out in writing in a legal document that both parties sign. You want to avoid going to court because you had a verbal agreement where one of you thought one thing and the other thought something else. Disagreements can happen when times are good and when they are bad. A verbal agreement just won’t cut it when it comes to your small business.
Keep all business matters straight with legal documentation. This will help you if you ever get into a dispute or one party wants to sell their share of the business. A legal agreement will detail who is entitled to what and how ownership is divided. Get it in writing and save yourself a considerable amount of hassle and expense.
Making shortsighted decisions
When you’re starting out with your small business, income is the primary motivator, and this is what the majority of your decisions are based on. It is easy to lose sight of the long-term goals of your small business and make decisions that save money now. You may be tempted to reduce expenses to increase your income in the short term, but this can have an impact on the success and growth of your small business as time goes on.
It may seem like a good idea to invest in assets that provide a number of tax benefits now, but these may reduce the overall value of your small business in the future. Think about the future when making investments to ensure you keep the value of your small business as high as it can be. Keep those profits strong and the future value of your small business looking up.
Don’t get stuck making shortsighted decisions to save a few dollars. Think long term and how the decision you are making now will affect your small business down the line. You are looking to sustain your small business over a lifetime and will reap the rewards through longevity. Think about the big picture and invest in your small business today to see the returns tomorrow.
Misunderstanding your market
It may be easy to open the doors to your small business, offering a unique product or service that you are certain will serve the niche market you are going after. But how much research have you conducted on the market and competition? You should know exactly who your competition is and what makes your small business’ products and services stand out against theirs. Look at how big the market is and what you can expect to gain in customers for your products and services.
Think about what your customer base will be over the long term, and about how you can gain control over the potential customers whose loyalty you don’t currently have. Make a business strategy and include your market interests to ensure you go about excelling in this space.
Without this information, you are taking serious risks regarding the growth of your business. Expanding too fast can result in saturation of the market and creates costly overhead that you didn’t have before. Take time to truly understand the market and your competition to develop a growth plan that your business can sustain each year.
Cutting your marketing budget to save money
When money gets tight with your small business, it may seem like a smart idea to cut your marketing budget to save a few dollars. While this seems like an easy solution, you are only doing your business harm in the long run. As the saying goes, “A man who stops advertising to save money is like a man who stops a clock to save time.” In other words, cutting your marketing budget will only reduce the revenue of your small business, not save you money.
Marketing is the main way that you attract customers, and stopping or constricting your marketing plan now can only be detrimental to your small business in terms of the number of customers who will buy your products and services. Continue to advertise even when times get tough and you will always be drumming up new business. You may not see your revenue grow overnight, but you will see results over time.
The expense that you invest into marketing has many benefits that impact the bottom line of your small business. If done right, the exposure your marketing plan gives your business can’t be developed any other way. Cutting back on this extremely effective means of getting the word out about your small business will mean a drop in revenue and fewer new customers finding out about your company. Keep your marketing plan in place and work to develop it even further every chance you get.
Making decisions for your small business can be challenging as you are constantly wondering how choices you make will impact your profits. Avoiding these four common mistakes will help to grow your business now and over the long term. It can mean the difference between being in business a short while and having a successful business that grows and thrives. Plan now for the future of your small business. Think long term and make decisions that will have a positive effect on your outcome over time.
About Brian Rowland
Brian joined the BizIQ team as Director of Marketing and Education in January of 2016. He brings with him over 15 years experience in achievements in sales, marketing, and new business development through B2B and Consumer sales. Brian earned his MBA from Indiana Wesleyan University in 2008, and also served as an Adjunct Faculty Instructor for University of Phoenix.
More from Brian | LinkedIn