Starting your own business is as terrifying as it is exciting. The rate of failure for small businesses is notoriously high, as some figures claim that around half of these enterprises go out of business within five years. However, what might help entrepreneurs avoid becoming another statistic is by knowing the common pitfalls that many small businesses fall victim to. This way, small businesses can be better equipped to see any red flags, and steer clear of these four mistakes right away:
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1. Spending too much on marketing
Marketing is essential — it’s how you build brand awareness, attract customers, and sell your products or services, after all. However, entrepreneur Alyssa Gregory points out that small even have a clear marketing plan yet misuse their funds trying to promote their business. In the end, these campaigns might not exactly benefit their business. One of the reasons why this happens is a lack of understanding of their target audience, which leads businesses to employ strategies that fail to engage or resonate with potential customers. Don’t waste your money by trying to sell to everyone, Gregory advises, and focus on a smaller audience instead.
Moreover, many small businesses try to cover all social media platforms with insufficient resources, rather than building presence via one avenue, which can be more effective in the long run. Remember that it takes time and effort to build a large following and attract loyal customers. Business owners should learn to manage their expectations, so be patient, and try not to abandon your marketing efforts if you don’t produce fantastic results immediately.
2. Underpricing
There is a wide array of financial mistakes that small businesses often make, and Business points to underpricing as one of the most disastrous. Startups, in particular, have a tendency to charge below market value because they believe it offers them an edge over their competitors. Many are also afraid to lose their customers if they charge any higher.
Although, business owners often neglect to factor in the labor and production costs, and other expenses, which can prove especially damaging to the business. It will be difficult to stay afloat if a company is trying to make up for its underpriced goods and services. Therefore, be sure to study your market, business structure, and customers well in order to determine a price that balances the demands of all three.
3. Attempting to deal with legal matters
Many people think that the only time they need to visit the doctor is when they’re already sick. Unfortunately, this is also the mindset of many business owners when it comes to legal advice. In an effort to save money, many only seek the help of legal professionals when things go awry and attempt to tackle legal matters by themselves even when they have no expertise in this particular field. However, Special Counsel states that legal consulting helps your business unlock its full potential with solutions that are tailor-fit to your business’ unique needs. There is no one-size-fits-all solution to legal matters, after all, especially in business.
This is why seeking legal advice is a smart move regardless of whether or not your enterprise is in trouble. Business lawyers, for instance, can help you obtain licenses and permits, write binding contracts and agreements, and protect your intellectual property, among many other things. Think of it as preventing your business from getting sick, rather than frantically treating it when it is already in danger.
4. Failing to test the market
One of the entrepreneurial trends previously noted by Radhika Chhabria here on Women on Top is to treat business as an opportunity to impact society in meaningful ways. To ensure that you and your business accomplish this, it’s best to test the market first before investing fully into your idea.
In this regard, SmartMouth Communications’ coach Beth Noymer Levine highlights the importance of listening to feedback when conducting marketing tests. This helps companies determine their unique selling point and steer clear from what your target audience might not respond positively to. If you skip this step, you won’t know for sure how your product might be received, how much people are willing to pay for it, and what other feedback potential customers might have to help your brand improve. Let’s face it: an idea is only be worth a million dollars if people are actually willing to pay for it.
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