When you first start a small business, you don’t have the luxury of experience. That means you’re going to make mistakes. You’re going to fail. But what ultimately determines your success is not whether you make mistakes—it’s whether you’re smart enough to overcome them.
That said, it doesn’t hurt to have some clue about what kinds of common mistakes most business owners make. We’ve looked up some of the mistakes that first-time small business owners regret making to help you avoid doing the same things as you start your small business:
Mistake #1: Arbitrary Pricing
Let’s face it: starting up a new small business is taxing. It’s tiring. It’s downright exhausting. You’re constantly working on one decision after another—from what your name will be to what your website will look like, down to individual vendors and branding decisions.
Then, when it comes to one of the most important factors in your business—the price—you decide you can’t take on any more decisions. You end up just picking a number out of thin air.
Sarah Shaw, CEO of Entreprenette, told Entrepreneur.com that when she started her first small business (selling handbags), she didn’t take everything into account when determining her company’s pricing. Although she grew the business to seven-figure revenues, it ultimately didn’t survive an economic downturn and eventually had to shut down.
Shaw pointed out that she hadn’t taken everything into account when factoring her prices—everything from marketing to wasted fabric—and that the pricing model made things more challenging than they had to be.
The lesson? Before you settle on your pricing, get a feel for the market, the common mark-ups, and what you should expect to price your own items given how much they cost to produce. The same is true for service-oriented businesses that have to factor in the cost of their time.
Mistake #2: Using Inexpensive “Friends” Rather than Professionals
You want to create a professional business. But that one word—professional—seems to go out the window in those early stages when your business is still fledgling and you’re not quite sure how you’re going to pull off normal business processes by paying “professional” prices.
What inevitably happens? For many small business owners, they start turning to the “deals” they can get. Maybe their brother-in-law volunteers to handle the business taxes. Maybe they hire a friend on a temporary basis for a low-skill job, only to find out that they’re essentially being taken advantage of.
In any business, there are some areas you don’t want to mess with. That means you’ll want to hire professionals from the very beginning. Here are just a few professional services you should outsource to someone outside the family:
Bottom line? When it comes to the legality and financial strength of your business, bring in an outside perspective to help.
Mistake #3: Ignoring Taxes and Regulations
When you worked for an employer, taxes and regulations were simple. The HR department took care of all of that. When you received your paycheck, you only had to look at the level of taxes taken out for you.
It’s very different in the world of small business. Suddenly you’re the one in charge of ensuring that you adhere to the letter of the law. And while consulting an accounting is a great first step to ensuring that you start off with your taxes on the right foot, there’s another area of compliance you might have forgotten about: regulations.
State and federal regulations have a way of interfering with small businesses—especially those that sell common products—imagined that their process would go. That doesn’t mean these obstacles will be insurmountable, but you don’t want to get into Year 2 of your business and discover that you’ve been labeling your products the wrong way and the regulators are knocking on your office door.
Mistake #4: Throwing Money at a Problem
If you’ve already read Mistake #2, you know the appeal of paying a lot of money to let a professional take over some section of your business. But that shouldn’t suggest that you can solve any problem you have by simply throwing money at a professional.
The founders of Wooly Pocket found that in the early iterations of their e-Commerce website, they didn’t know what the requirements of their Internet-based infrastructure would incur in terms of cost. The result: they ended up throwing money at it to the tune of tens of thousands of dollars. That might not even be an unreasonable cost given the nature of e-Commerce…but the Wooly Pocket founders discovered that each version of their website didn’t satisfy their needs. They ended up having to redo their site again and again—paying out-of-pocket for each new version.
Before you embark on an ambitious new project for your business, make sure you understand what needs to be achieved first. Then you can think about hiring the very best professionals.
Mistake #5: Assuming a “Viral” Hit Will Fix Everything
Marketing has been around for a long time. Marketing is still around. Marketing will still be around for a long time—long after your business has closed its doors.
It’s tempting to see today’s viral hits and imagine that all you need is similar traction to launch your business. But you’re likely only seeing the hits.
Counting on your product or service—or some aspect of your marketing—to go viral means that you’re putting the responsibility of sales on your customers, not on you. That’s a key mistake. As author Drew Williams told Entrepreneur.com, many businesses target a marketing budget of about 10-20% of revenue.