According to the U.S. Government Small Business Administration’s home page, about 50% of small businesses fail within the first five years. I’d bet the number one reason is the entrepreneur did not take the time to learn what he or she should!
Whether you’re a corporate refuge, a recent grad, or a mom re-entering the workforce, you’ll want to avoid the pitfalls that others just starting out have experienced. You know you can be on the successful side of the statistic, and here are some mistakes you’ll want to avoid:
Mistake 1. Not Planning Enough.
You need a business plan, and although it doesn’t need to be the length of War and Peace, you do need to strategize your mission, goals and objectives, marketing plan, and financial forecasts. Going through the process forces you to look at the total picture to ensure your business idea is viable.
One of the most important parts of your business plan is your marketing plan. No matter how brilliant your product or service idea is, without an effective, comprehensive strategy to spread the word about your offerings over time, your business may languish. Exploit the many free or low cost marketing channels out there such as social media marketing, and blogs, as well as friends, colleagues, and family who will talk you up.
Even thinking about where your home office will be physically located is important to ensure that you have the privacy and quiet you need to focus, think, and work.
Mistake 2. Underestimating the Necessary Commitment.
Even though you want a small business for the freedom that it will bring, it does take attention in the beginning to get traction. Since you’ve chosen to do something that you are passionate about, that probably won’t be a problem, but you may have competing interests such as your family.
Many home-based moms, for example, work a split shift: working in the morning when the children are in school, attending to them in the afternoon and evening, and then working again in the evening after they’ve gone to bed.
Plan to spend most of your time marketing your business in the beginning, accessing every avenue available to you online and in person. Being consistent is vital: get that ezine out regularly, update your blog, Twitter and Facebook accounts, and attend that local networking group without fail.
Mistake 3. Overspending
Spend enough money to look like you’re serious, but not too much so that you break the bank before your first sale. With a home-based business, you’ll need to have a reliable computer, a professional web presence, an excellent phone setup, a printer and a fax, and you’re good to go. Instead of buying absolutely everything that you’ll need up front, consider rewarding yourself with acquisitions as the sales come in (e.g., “My launch was a success, so it’s time to get that new smart phone.”)
Mistake 4. Underpricing.
In the beginning, determining what to charge may confound you. As you can guess, you want to charge enough to be taken seriously, and not too much to price people out of the market.
Staring a business may well bring up personal issues that you weren’t even aware of, and putting a value on what your time is worth may go to the heart of that. Remember that it is less about you and more about: a) what the marketplace is charging; b) what alternatives people have; c) convenience; d) how much risk people feel; e) how much benefit people perceive. See how it’s more about them?
Do your homework like any customer would and compare what’s available. Ask colleagues what they might spend for what you are offering. Pick a number that you can confidently promote, yet not feel like you are underselling yourself. Pricing has little to do with costs except that you have to cover them and have something left over for a profit. Assign value to what you’re offering, and don’t sell yourself short.
Mistake 5. Dismissing Legal Considerations.
There’s no shortage of government websites that are eager to help you get started on the right foot. The easiest way is to key “starting a business [Your State Here]” into your favorite search engine. Additionally, there’s helpful information at the IRS website, Small Business Administration, and Business.Gov site.
To keep your records clean from the beginning, keep your personal and business funds separate. Even though it is tempting to start out as a sole proprietor, you’ll save time and hassle later by starting out with a legal structure that protects your assets from the start, such as an LLC. Consult your CPA for the best choice for you.
Throughout this process of starting your business, you’ll need to balance between “preparing” and “dawdling” — get your ducks in a row, but don’t procrastinate to the point that you never take action. Do your homework so that you have a plan, and you’re well informed about the sphere you’re entering. Price yourself intelligently, and spend wisely in the beginning with just the “must haves” and reward yourself with the “want to haves” later. Be aware of the few legal considerations and make thoughtful choices from the onset. Bring passion to your business and a willingness to devote the necessary time in the beginning to make an impression in the marketplace.
© 2010 Ali International, LLC
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