3 Traps to Avoid When Launching a Small Business
Trusting too much in your own genius ideas, trying to do it all alone and being inflexible are three common traps you’ll face when starting your own business.
PHOTO CREDIT: Getty Images
Every small business is unique but the traps and pitfalls that lay in wait to keep new ones from succeeding are often the same. About half of new businesses survive to celebrate their fifth year. On reflection, many small businesses owners who call it quits will claim that the failure was the result of being underfunded, under-estimating the level of competition or misjudging the market. But it's more likely that the real cause is more personal and avoiding some common traps can help you plan for launching a business within your budget and for unforeseen changes in the market.
Following are three pitfalls and common mistakes to avoid if you decide that 2018 is the year you launch your new business.
1. A concept or idea is not the same as a plan
Great businesses often start with an amazing idea, but ideas don't automatically translate into success. If you hope to start a successful business, you need to take that incredible idea and then hammer out a solid plan. This should spell out the details around how you will produce your product or service, how you will set prices, who your customers are, and how you plan to reach them.
Spend some time figuring out how you plan to get paid (whether it's all up front on order or whether you get a some upfront and the rest on completion of the project). This can have huge ramifications on your ability to keep a cash flow and to order supplies, so it's worth at least having an initial plan. Drill down into the details to address how you will deliver your product, sketch out how you will handle product returns and who will provide support and customer service when things go wrong.
While you're planning your marketing and operations, give some thought to finances and whether you're ready to jump into this venture full-time or would be better off keeping your day job - at least until your new business has some revenue.
This plan will help you to avoid marketing, production and revenue gaps that can doom the best of intentions and the brightest ideas. Preparing the plan will also often highlight competitors and may reveal opportunities that you can take advantage of.
2. Going solo doesn't mean being a hermit
Entrepreneurs and small business owners tend to be conversant in a wide variety of areas. But even the most skilled entrepreneur can't expect to be an expert in every aspect of their business.
Starting a small business typically involves website development, creating marketing, setting up accounting and legal services, figuring out billing and shipping, even dealing with customer privacy and security. The most successful business owners are those who are honest with themselves about their own strengths and weaknesses.
There is simply too much for most people to handle alone, so focus your attention on areas where you already have expertise and play to your strengths. Then find easy-to-use products and partners to help with those projects where you have no experience. You may be perfectly capable of learning how to code a website or getting up to speed on the latest search marketing tactics and how to develop targeted content. But if your expertise is in landscaping and working directly with customers, focus on that and job out the rest. Your website will look better for it and you'll be able to concentrate on tasks that have the highest value for your future success.
3. Don't be afraid to fail and be ready to pivot
Less than half of new small businesses survive past their fourth year. But you can increase those odds if you keep your eyes open and are open to pivoting to take advantage of new opportunities that you uncover along the way. These might be products you hadn't thought or tapping market segments that you weren't aware of and might be ready for your service.
The timelines of wildly successful businesses often include spectacular early failures and pivots to better opportunities. Before Rowland Hussey Macy opened his first of what would become hundreds of Macy's stores, he spent more than a decade launching four dry goods stores that would eventually go bust.
Some successful companies survive because they are nimble enough to pivot away from initial missteps. In the very early days of Sony, the company's first products were shortwave radio components and repair services that helped re-establish communications in post World War II Japan. The fledgling company's next big bet was producing an electric rice cooker that was widely panned as being capable of little more than ruining a bowl of rice and leaving you with a wooden tub to clean. Sony cofounder Akio Morita spent little time mourning the failure and the list of spectacularly successful Sony products has been growing ever since.
Closer to home, some of the most successful third-party developers that I work with through Yahoo Small Business started out as online merchants. Working in the early days of ecommerce, they realized that their self-taught technical expertise in creating an online store and building systems that supported online commerce was ultimately more valuable than their ability to sell candles, T-shirts or other wares. Most of these developers have since closed their online stores and have built million dollar tech businesses building literally thousands of successful small businesses.