10 Common Mistakes Small Businesses and Startups Make

The United States Bureau of Labor Statistics states that only 34.7% of businesses started in March 2013 were still operating by March 2023. This is even lower for certain industries, with the information industry at 29.1% and wholesale trade at 32.1%. Survival rates also decline every year. It’s not news that it’s hard to start a business, but avoiding common mistakes can increase your chances of success. This article highlights these mistakes and what you should do instead.

Mistakes to Avoid in Startups and Small Businesses

To succeed as a startup or small business, you need a clear plan and to adapt whenever necessary. Common mistakes generally revolve around poor planning, so be mindful of these 10 items.

1. Failing to Research Your Target Market and Competition

A great business serves its customers. You can’t create a business for yourself alone. Researching your target market is essential in identifying problems your business can solve. This helps you understand whether your business idea is feasible and can be sustained in the long term.

Additionally, researching your competition helps you figure out where they’re lacking and how your business can fill the gap. You may even learn from their mistakes. Aggressive competitors can also influence your business decisions. Are you willing to take on businesses that have already made a name in the industry?

When researching the market, ask yourself:

• Is there an existing interest in what you offer? Can it solve people’s problems?
• Is the competition high? How many other options will you be competing with?
• If there is a demand, how large will the market size be? Is it sustainable to cater to a niche audience, or would it be better to go for a general market?
• Do you plan to serve only specific locations? Who are your customers in those locations?
• Are your potential customers willing to pay for your products or services? Do you think that the value you provide is worth their money?
• What’s the current state of the economy? Are people likely to splurge, or will they be more likely to save during this time?

You can directly perform your research through surveys, in-depth interviews, or focus groups. Government data from the Bureau of Labor Statistics, Bureau of Economic Analysis, and Census Bureau can be helpful, too. Additionally, organizations such as the PA Small Business Development Center and SCORE can help you analyze your research and assess your next steps.

2. Having No Clear Business Plan

A business plan can help you gain funding from investors. But more than that, it’s also your roadmap. It’s hard to build a business for the long term if you don’t know where you’re going. You can create a detailed business plan or a summarized and lean version. There’s no one right way to do it. What matters is that your plan caters to your business needs.

Your business plan should explain your solutions to the needs of your target market. It can include your methodologies for developing and testing your product. It can also provide the steps to take in case challenges arise. There are free resources at the PA Small Business Development Center and SCORE to help you write and refine your business plan.

3. Mismanaging Your Finances

It takes hard work to get funding, whether you’ve been bootstrapping, applying for a small business loan, or getting investors for your company. However, many entrepreneurs still fail to manage their finances, especially without the help of experts, such as a certified public accountant (CPA). Know that it’s never too early to have help, as unnecessary expenses are costly mistakes.

Numbers can be deceitful. It’s dangerous to assume early on that your product or service is already a hit and that it will be smooth sailing from then on. Be cautious and plan for potential expenses, especially as your business grows. You should also keep cash reserves. In business, market changes and demand fluctuate. A cash reserve can help keep your business afloat during these seasons.

If you do need more funding, there are a few financing options you can go for, such as grants, incentives, and government programs.

4. Failing to Connect With Your Community

Your business should not be built in a vacuum. Connecting with your community can help you network with fellow entrepreneurs. SCORE, for instance, is an organization dedicated to helping businesses start, grow, and succeed. Attending their workshops can help you connect with like-minded business owners, build relationships, and gain new perspectives.

Similarly, connecting with your customers helps you better understand their pain points and whether they would be interested in your products or services. You can create a better business plan by talking to real-world customers instead of simply imagining them. Engaging with customers is essential if you’re a local business.

5. Ignoring Customer Feedback

One rookie mistake small businesses make is ignoring customer feedback. A product or service can’t be set in stone — it should evolve and grow based on how your users interact with it. Listening to feedback also shows your customers you value them and can increase your trustworthiness. It demonstrates that your business is truly built to solve their pain points.

You also can’t build a loyal customer base if you neglect what your customers say. You can collect customer feedback through surveys, emails, comment sections, and automated chatbots.

6. Not Investing in the Right Team

Whether it’s the lack of training or hiring the wrong people, not investing in your team can be catastrophic for your business. Your team is an asset and will likely move the needle of your business. Even solopreneurs may need to hire part-timers at some point. The key is to ensure you’re working with the right team and that they have everything they need, such as the right tools and skill sets.

It’s also important to have everyone on the same page. Startups break up because co-founders don’t have the same vision for the company. Your employees will also be more likely to get engaged if they know the purpose behind their work.

Workforce boards are a great resource for finding qualified talent to build your team.

7. Failing to Protect Your Business Legally

You need to take your business seriously, even if it’s still small — that means you must have contracts in place. It’s not about whether you trust your co-founders or colleagues. Contracts protect you, the business, and everyone else on the team. You need to have the correct legal structure, which can protect your personal assets. You also need to protect your intellectual properties, whether through trademarks, patents, or copyrights. Get an attorney to draft your contracts to avoid mistakes.

8. Failing to Adapt and Innovate

Successful startups and small businesses evolve. They adapt to the changing needs of the market. Plus, they’re willing to integrate new advancements and technologies into their services. Even if you don’t currently need to scale or diversify your services, failure to adapt can kill your business later. Building a company culture that prioritizes innovation can be one way to ensure your business keeps up.

9. Having Poor Work-Life Balance

You’ve probably heard of entrepreneurs saying they left their nine-to-five to work 24/7. Unfortunately, having a poor work-life balance is common among business owners and is one of the causes of burnout. Getting burnt out affects the team and your decision-making. Setting clear boundaries, physical and digital, can help you avoid burnout. You can also delegate and automate certain tasks to get them off your plate.

10. Expanding Your Business Too Early

One of the reasons startups fail is due to premature scaling, which could look like:

• Hiring too many employees
• Diversifying product versions unnecessarily
• Opening multiple locations too early

If you need additional services, consider freelancers instead of full-time employees. If you’re getting lots of customer feedback, consider implementing changes one at a time. If you want to open new branch locations, consider the long-term costs of scaling to avoid expensive mistakes. It’s better to have sustainable growth than a quick and overnight success.

The Key to Success for Small Businesses

Startups and small businesses can increase their chances of success by avoiding hasty decisions. Reflect on mistakes other companies have made, and don’t focus on success stories. Additionally, learning the steps successful businesses take can serve as a good template. Expect to make mistakes as part of the process. What you want to avoid are those costly and catastrophic errors that can kill your business.

Grow Your Small Business With CAEDC

Mistakes can seem inevitable, but this isn’t always the case. If your startup or small business is in Cumberland County, then the Cumberland Area Economic Development Corporation (CAEDC) can be a great resource in helping you achieve your business goals. We can work with you through all stages of your business’s growth, whether you need to start, expand, relocate, redevelop, market, or network your business.

We can offer low-interest loans, incentives, or grant programs when you need them. We can also assist in land development and connect you with the right organizations and municipalities. Let us help you make business a little easier. Give us a call to learn more!