What Are The Most Common Mistakes That Small Businesses Make

What Are The Most Common Mistakes That Small Businesses Make

Businesses don’t come with owner’s manuals, you have to write your own. As you might imagine, the unfamiliar challenges you face as a business owner are yours and yours alone to grapple with. While every business will face its own unique hurdles, there are several mistakes that seem to crop up for the majority of new executives. To avoid the most severe errors, please be on the look out for the following mistakes.

Not Knowing Your Target Market

A shocking number of businesses cannot articulate in a few sentences who their typical customer is. The common characteristics and personality types of their target market remain somewhat of a mystery as their marketing teams tries to reach the greatest number of people possible with their new message. This is a dangerous strategy, considering that “everybody” does not buy your product, a specific group of people do.

Ultimately, business is often about customers buying the product, not the product itself. Thus, you must start with an understanding of why your customers buy your products and work from there. Are your customers mostly young or old, college kids or CEOs, accountants or moms? Constraining your marketing efforts to exclude everyone not in your target market may seem limiting, but doing so may drastically increase your profit margins and provide you with a better understanding of your unique buyer.

Management By Crisis

There are many management styles that business owners can operate under, but by far the most dangerous (and unfortunately quite common in the early days of a company) is management by crisis. Essentially, this management style means that you are always reacting to problems rather than proactively moving forward. If the only time you pay close attention to your business is when something is going wrong, that’s management by crisis.

Management by crisis can be poisonous because it keeps a business stuck in neutral. On the good days, everyone cheers, but no one may push any harder. Then something goes wrong and it becomes a mad dash to restore the status quo. Effective management means paying the most attention to your business when things are going well so that you can learn from your victories and grow from there. Strive to prevent a crises rather than simply responding to them.

Not Systematizing Work

Too many business owners deal with each job as it comes. What they fail to realize is that many of their tasks have similar qualities and characteristics that may always need to be handled the same way. For example, if you own a web design firm, each of your websites might need the same tracking code, shopping cart implementation, and branding elements.

By figuring out what these common tasks are, you can systematize the work by defining step-by-step guides for completing jobs. Creating systems allows tasks to be completed with less mistakes, and in less time each time they come around. Look around your business for reoccurring tasks and seek to set systems in place for how they are to be completed each and every time.

Not Being Open To Change

Paul Graham, a notable venture capitalist and co-founder of seed funding firm Y-Combinator, says that “In some fields the way to succeed is to have a vision of what you want to achieve, and to hold true to it no matter what setbacks you encounter.” Getting an Olympic medal is one such example. Business, he argues, is a lot more like science in that you have to follow the path wherever it leads.

The lesson Graham is imparting here is to stick to your business plan, but be willing to adjust to circumstances when they arise. Your customers, through their buying behavior and feedback, will tell you what they want from your product. Don’t fight it — be willing to embrace it. It’s like Graham says, “If you want a recipe for a startup that’s going to die, here it is: a couple of founders who have some great idea they know everyone is going to love, and that’s what they’re going to build, no matter what.”

Spreading Focus Too Thin

The best businesses you know do one or two things and do them very well. Rare is the company that goes a mile wide and an inch deep and turns a sizable profit. Consider a new company diving into web design, property management, file sharing, and affiliate marketing — this is an extreme example to be sure, but there is no doubt that this business would quickly crash and burn. There is simply too much to know in each domain for any one team to do them all well.

Take Google for example. Sure, now they offer a wide variety of products, but they got to where they are by being the best at search. Had they never buckled down and dedicated themselves to that one goal, we might never care when they came out with new products today. The trick is to find the niche you can serve best, and throw all of your efforts into it. If opportunities for expansion become sensible down the road, consider them when the time is right.

Only Considering Current Competition

World famous hokey player Wayne Gretzky once offered the advice, “Skate to where the puck is going to be, not where it has been.” Applied to new businesses, this means that you must try to have foresight and anticipate competition that may not be prevalent or mainstream yet. If you’re in a market where you don’t believe you have any competition, it means one of two things. It could mean you don’t have an economically viable idea, as Paul Graham explains “You can only avoid competition by avoiding good ideas.”

There is another possibility, though. It could mean that your competition is still so small that they aren’t yet visible to you. Like you, they could be holed up in a tiny office or bedroom somewhere plowing away at your very product. Keep this in mind as you work, and try to anticipate moves from a small company closing in on your same niche. By keeping this in mind, it will increase your odds of not being caught by a surprise competitor jumping onto your scene.

Additional comment: A great example of a company that has avoided these mistakes and is continuing to grow is the auto insurance company Allstate.