For many, one of the greatest thrills of being a small business owner is the sense that there's always something new to learn. You can never know everything about your product, your market, and all the ins and outs of business ownership -- so most entrepreneurs are left to figure it out as they go along.
Unfortunately, that learning curve is often fraught with lessons learned the hard way, by making mistakes and suffering the consequences. While you'll no doubt take your own missteps and learn your own tough lessons in the journey of entrepreneurship, maybe a few words of warning will help you to avoid these eight biggest mistakes.
1) Sidestepping Leadership
There's no getting around it -- being a business owner means being a leader. It means speaking up, taking charge, making tough decisions and being accountable for the consequences. You don't necessarily need vast amounts of leadership training to own your own business, but you do need to be willing to step up to the plate.
2) Not Acknowledging Your Weaknesses
And yet -- as much as your business is ultimately your responsibility -- the strongest business leaders also know they don't have it all together. You can't possibly be an expert in every area of running your business, and if you try to be all things all the time, you're doomed to fail in one area or another. Take a fearlessly honest inventory of areas where you struggle, and make a plan to get help where you need it.
3) Doing Your Own Accounting
With easy-to-learn software like QuickBooks and Xero so readily available, accounting is the one area business owners are most likely to incorrectly assume they can do it all themselves. But just because you have a software and have learned to click a few buttons doesn't mean you have the knowledge and experience necessary to keep your business's financials on the up and up.
A strong accountant will not only monitor your books for errors, find available tax breaks, and answer questions; they'll also provide needed accountability to your business spending, help you identify cash flow challenges, and provide steps to help you improve the profitability of your business. It's almost never too early to seek the counsel of a CPA as you grow your business.
4) Hiring the Wrong People
As you've already learned, you can't run a successful business all by yourself. You need a team of intelligent, capable, and loyal helpers to make your business dreams a reality. Whether just one or a few employees or an outsourced team of contractors, having the right team is essential to your business success.
For many first-time business owners, it's tempting to hire friends or family, giving little consideration to what skills are needed or how positions within your business may grow in the future. Whoever you choose to join your early team, make sure your hiring choices will successfully move your business forward and stand the test of time.
5) Underpricing Products or Services
Especially in service based businesses, early entrepreneurs are often tempted to undervalue their offering in an attempt to win more customers. After all, you're the "new kid in town," right? You have less experience, you need new business, and it might seem that offering bottom of the barrel pricing is the only way to get there.
But there are pitfalls to underpricing your product or service. Customers may assume that the offering isn't as good as your competition's. And customers who are swayed by your early low pricing may be unwilling to pay a higher rate later on. Plus, if you don't set prices high enough to cover your expenses, you may not be in business long enough to ever raise your prices at all.
6) Underestimating Your Competition
Don't underestimate competitors in your industry -- the services they provide, their knowledge of the market, or the loyalty of their customers.
Take the time to thoroughly research your competitors: their offering, their specialties, the history of their business, and their strengths and weaknesses. While there's value in being confident, don't let pride leave you in a competitive blindspot.
7) Ignoring Data
Most entrepreneurs have a strong gut instinct. They know what customers want, and they have an intrinsic sense of how to provide value. While there's nothing wrong with trusting your gut, the smartest entrepreneurs also know the importance of backing up important decisions with data.
Survey your prospective customers. Study your market. Use focus groups to determine preferences, and analyze metrics to see what's working and what isn't (both in your product and in your marketing strategy). By backing up your gut instincts with hard data, you'll minimize time and money spent on strategies that just aren't working.
8) Growing Too Quickly
It's true, the early days of owning a business are as exhilarating as they are exhausting. You may have a close network of enthusiastic early adopters to your product or service, and you may feel the sheer thrill of your offering being in demand. But if you grow too fast or burn through those contacts too quickly, you risk facing a sudden drop in demand, or worse, not being able to maintain the same quality in your offering or your customer service as you grow.
While you don't want to miss opportunities, remember that growing the right way usually trumps growing as quickly as possible.
Did these eight common mistakes raise any red flags in your current business practices? If so, take immediate steps to learn from the lessons of your predecessors. It may not be too late to avoid the consequences of learning as you go!