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Victoria Scott
Victoria Scott

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5 Common Pitfalls of Starting a Business

According to the data provided by the U.S. Bureau of Labor Statistics, 20.4% of new businesses fail during the first two years of operation, and roughly half of all businesses don’t survive past the fifth year.

I use this stat quite often in my posts because it truly reflects the reality as well as the competitiveness of starting a new business in any industry!

With fierce competition existing in the market space now, how do you plan to successfully launch and run your own startup?

We all know that the economy is slow and it may be more difficult to get startup capital for your business now given the ongoing pandemic. The situation may become even worse if customers begin to cut back on their spending power because of economic uncertainty.

It’s no secret that starting a business is incredibly difficult. If you’re an aspiring entrepreneur all juiced up to give everything you have to your business idea, you definitely need to pay attention to this.

I am going to list the top 5 mistakes most businesses make in their budding years that you must avoid getting a good headstart.

1. Not Hiring the Right Talent

With more aspirants looking for jobs now, the hunt for the right talent has become even more challenging than ever before. And this situation is not just for companies. It’s the same for talented and experienced people who lost their jobs due to this economic crisis.

I am a Software Consultant with 6+ years of experience. It took me almost 3 months to find a new job, even with this experience.
Companies across the globe are competing for hiring the right talent. Getting the right people on board without taking too much time is a must for your company to build your product or start offering your services.

Hiring the wrong people and investing too much in recruiting are the things to avoid before starting a small business. And not every startup has a plethora of resources at their disposal, especially when they are just starting off!

So I suggest that to ease the process, you can outsource web development services for your business. Startup owners and small business owners hire an outsource company to increase efficiency.

Now, I am aware that many businesses frown upon outsourcing but I fail to understand why. It’s good to have an in-house team but why not leverage communication & collaboration tools at your disposal to work with a remote team of experts rather than just spending money on setting up your team?

Did you know that a report by Clutch says that more than one-third of small businesses currently outsource a business process?

Here is how you can find the right outsourcing partner for your business.

  • Assess your requirements and know what exactly you need.
  • Check for the technical expertise of the hired developers.
  • Before signing an agreement, check the market reputation of your outsourcing partner before signing an agreement.
  • Figure out and finalize how much money you are willing to invest in your project and decide a specified timeline for this.
  • Prefer to hire a vendor who follows Agile methodologies to easily adapt to the changing requirements of your customers.

2. Ignoring Risks

Ignoring possible risks is one of the best things you can do when starting your new business.
For instance, some startups fail because of overly optimistic financial projections and this can be harmful. Some new entrepreneurs make the mistake of not thinking carefully about the risks that their business can face during a pandemic. This is something you should definitely avoid.

Trust me, creating a business plan to face situations like these is essential. It’s important to carefully examine and assess the potential risks that can harm your business.

I am listing down some questions to help you find these risks.

  • Do you have adequate business insurance?
  • What happens if you can’t get your revenues up to speed as soon as you thought you could?
  • What happens if the pandemic drags on longer than expected or takes a turn for the worse — how will that affect your business?
  • What if your business is affected by some other natural disaster, fire or flood?
  • Are you adequately backing up your sensitive business data in case you need disaster recovery?
  • Stay wary of your competitors and know their strengths.

Sometimes, your business may fail to face the competition thus disrupting your business completely. There are examples when companies went completely bankrupt due to disruptions. The same happened with “Blockbuster” when Netflix disrupted their market forcing them to file for bankruptcy protection.

3. Failing to Control Costs

I have been telling this to every entrepreneur who contacts me. At the end of the day, the sustainability of your startup depends on how balanced your finances are.

Not being careful about controlling costs and spending unnecessarily are the common mistakes to avoid while starting a business. You need to be hard-hearted about controlling costs, especially if our business is not driving in significant profits.

For instance, you have to be as open to firing bad employees as you are to hiring good employees.

Avoid investing in things not needed and spending unnecessarily. Align the spending's of your business as per these key strategic goals: product development, customer acquisition, or risk management.

Here is how you can control costs to avoid the pitfalls of starting a business.

- Find the Right Size Office Space:
Spend judiciously while investing in office space. Do not spend too much. Find a place at a cheaper lease, or consider moving your office to a home-based environment. You can also consider signing up for a coworking studio or shared office space where you can split the costs with other businesses.

- Reconsider Full-Time Employees:
Though a recession can be a great time to hire, you can avoid hiring full-time employees if possible. You might want to set up a team of offshore developers and just pay for performance or pay for specific deliverables to get done. Full-time employee headcount can get expensive quickly.

- Reevaluate Spending on Software/Platforms/Marketing Tools:
Assess your business requirements and plan accordingly to spend money on multiple user licenses for different business software/platforms? Keep a close look at your spending on things like marketing automation software and customer relationship management systems. See if you can reduce costs by eliminating the spending's on these.

4. Not Being Strategic About Sales

Remember, sales is the most important part of your business. Businesses often tend to forget this.
I often tell businesses to create great sales processes rather than focusing on hiring great salespeople. Processes are more reliable than people — it’s as simple as that.

Having said that, you need to have a well-designed sales strategy for increasing sales. Not working strategically about sales is one of the things to avoid before starting a small business.

If you’re not selling your product, not bringing in new business, and don’t have a full pipeline of sales prospects, your business won’t survive for long. Make sure you are dedicating full effort and focus on sales.

Here are a few key tips to get strategic about sales:

- Make a Big List of Sales Prospects:
Know more about who your target customers are.

- Create a Detailed Sales Process:
Create a simple, consistent, and repeatable system to work customers through the buyer’s journey.

1. Contact your customers
2. Give a demo of your product/service online
3. Talk to other stakeholders
4. Share estimated ROI of the product and how it will help the customer
5. Answer final questions
6. Then, close the deal

- Keep Track of Your Sales Efforts:
Every company needs a CRM (customer relationship management) system. Whether it’s a spreadsheet or a more elaborate program like Salesforce, you need to keep track of every customer conversation and point of contact.

5. Not Choosing the Right Product or Service

Not choosing the apt product or service to sell is one of the things to avoid before starting a small business.
Clearly, the post-COVID era might not be the best time to open a dine-in-only restaurant. So, what to do then? If you can successfully pivot your business idea to suit new opportunities, you may run your business profitably even during tough times.

Let’s see how.

Say, for instance, you can shift your restaurant concept to takeaways, carryout only, a food truck, or pop-up catering events conducted outdoors. Doing this just might work and help you run your business successfully in this new normal.

One reality of the coronavirus crisis is: anything that can happen online, will happen online. People still want great products and customer experiences, but many of these things need to shift to an online model or a hybrid model of online and in-person experiences.

Final Words

Starting a company is never easy, even during “normal” times. But if you can avoid these common pitfalls of starting a new business, your business will continue to thrive even during difficult times.

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