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Starting a business isn't easy. Statistics may not always speak the complete truth, but when you look at the statistics of small business success in the first five years, it isn't reassuring. The United States Small Business Administration states that over half of all small businesses won't make it within their first year of startup. The outlook for the next five years is no better: 95% of small business will shut their doors within this time.
There are several things that can be done to try to avoid putting the "closed" sign on your doors for good.
The first common mistake deals with poor market research. It is important to talk to a competitor that is not in your market territory. This competitor knows the business and will offer valuable market insight. I had a Pittsburgh client who wanted to start a "Virtual Law Office" using a specific software program. Since lawyers are licensed by the state, he was not directly competing with other clients of this software company in Florida or Ohio. Had he called those lawyers, he might not have lost thousands of dollars with this flawed software. Another common mistake of new business owners is poor financial planning, especially concerning cash flow. A small natural grocery store may plan on spending only $8,000 per month. After several months in business they come to realize with rent, utilities, product ordering, and wages the total comes to $10,000. The business also thought their sales would be much higher than they actually are. In the end they don't have the money to cover their expenses. Don't make the mistake they did and assume you will get a return early, ran out of money, and have to close shop. Hiring the wrong people is another very common mistake. The unemployment rate in the US now is about 9%, so you have a great opportunity to hire wonderful employees. Attitude isn't always given enough weight when hiring. While skills can be learned, especially by enthusiastic, optimistic people, by the time they are adults, most people's attitudes are more or less fixed. Southwest Airlines knows the value of hiring people with positive attitudes. The first trait the company looks for in applicants is a sense of humor. It's an attitude that permeates the company from the CEO on down. Southwest Airlines CEO Herb Kelleher has said, "I want flying to be a helluva lot of fun! We want people who can do things well with laughter and grace." This attitude has contributed to Southwest's success. Conventional thinking is also a business killer. If you do things the same way everyone else does, why would anyone do business with you? You need to set yourself apart. Think out-of-the-box-Try new techniques & processes. See what works. Don't be afraid to experiment. The last common mistake (although this is getting less common with time) is not taking advantage of the power of the web. I worked with carpet cleaning company who saw their leads move from 20% to 80% off the web in the last 5 years. With online reviews, its common for people to search the web rather than asking their friends for referrals when they need something. This is a source of business you just can't afford to ignore anymore.
Dennis Piper is a Pittsburgh Accountant with over 20 years of experience in providing tax compliance, business and bookkeeping accounting service, to corporations, individuals, partnerships, limited liability companies, estates and trusts, not-for-profits, and pension and profit-sharing plans.
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