Whether you are thinking of becoming an entrepreneur, or have already started working on your business idea, itís easy to get excited about the future and forget the fundamentals. Many of the issues that plague beginner entrepreneurs ó and that often lead to startups failing ó are easy to fix and avoid if you can see them coming. With that in mind, here are some of the most common mistakes made by beginner entrepreneurs.
1 – Not having a (professional) business plan
Itís common for startups and new small businesses to either skip getting a business plan entirely or put together an insufficient plan that wonít really help guide them moving forward. The truth is that every business, from simple street vendors to complex software startups, can greatly benefit from having a detailed business plan. Preferably one put together with the help of consultants with experience in the market youíre about to enter.
Business plans can help not only define success in concrete terms, but also define failure. That helps you spot when things are going wrong sooner, which in turn allows you to change course accordingly.
2 – Underpricing
Setting prices is a complex art form of its own. Itís common for new entrepreneurs to sell their services at a loss without realizing, due to improper financial management. This can happen when you fail to take into account secondary costs that need to be part of your asking price in order for your business model to be profitable in the long term. These include salary costs, electricity costs, maintenance costs for the material, the cost of replacement parts for the things that will invariably break, and more.
Make sure you keep track of the cash flowing in and out of your business. Donít let growing sales numbers alone fool you into thinking you must be making a profit on every good and service. The longer you take to spot an underpriced item, the more money youíll bleed out from it.
3 – Not managing overheads
Allowing overheads to ramp up too quickly can kill a new business venture. Overhead are all those monthly and yearly bills you need to pay to keep your business operating, including electrical bills, salaries, utility bills, rent, loans, and more. Overhead costs usually balloon when companies try to expand too fast.
4 – Not negotiating with suppliers
New entrepreneurs often feel intimidated at the idea of negotiating with suppliers and other business partners. But if you want to give your business its best chance of success and survival, getting good deals from suppliers can give you a huge advantage. Itís not something you should skip on.
The good news is that technology is helping with this process. There are now platforms that let you compare the costs of raw materials between all suppliers in a given region and even platforms that let you compare cheap couriers so you and your customers can save on shipping. But in many areas of the market, negotiating directly with the supplier still is the best way to get a good deal for your business.