Every new business begins with several inherent risks and the best way to prevent problems is to be prepared in advance by solid financing and avoid the most common pitfalls.
Dangers that New Small Businesses Face
Financial risk - Every new business faces some financial risk, even if you are operating out of a home office. You need to have a sound capital structure to survive in business. Don’t take on too much debt and don’t over spend. You need to watch your seed money and don’t spend it away before a positive cash flow is coming in. You need to be certain you have a cash reserve to use as back up to pay your bills if necessary. Your creditors will expect to be paid, regardless of whether you are realizing a profit or not, so you must have a way to meet those payments. Pay strict attention to your financial records so you always know where you stand.
Mismanagement of the Time Factor - When you are the owner of a business, and especially if you are operating as the sole employee of the enterprise, it is very easy to spend far too much time of the details of the operations rather than using your expertise to succeed in and expand your new company. Things like bookkeeping, schedules, appointment setting, correspondence and basic office tasks may not be the best use of your time. Often, your business is better off if you delegate some of these jobs to employees or outsource the work to freelancers, contractors and those who specialize in these areas. You can then use your expertise to further your business and provide the creative activities that led you to open your own business in the first place.
Ineffective Marketing - Find creative ways to advertise and promote your business. The old adage that “in good times people want to advertise and in bad times they have to” is very true. No matter what, you must always continue to market your business and promote it at every opportunity. Use direct mail, ads in your local newspaper, create a website, start a blog and sponsor community events to keep your business name in the eye of your potential customers.
Poor Service to Consumers - It seems difficult to imagine, but one of the main reasons businesses fail is due to poor customer service. No matter what industry you are in, your customers are your lifeblood. Treat your customers with the respect and appreciation that they deserve and you will build up a loyal fan base that will carry you through the tough times. Never underestimate the power of your competition to entice your customers through a great offer and then keep them with superior. Always remember that customer loyalty is not given, it is earned.
Failure to Adjust- No matter how much passion you have for your business, it won’t thrive if your customer base doesn’t share your passion. Be willing to recognize new opportunities to change direction when necessary. Be flexible and willing to adapt to changing times. Spend regular time generating new interests and areas of expertise so you will be ready to shift the focus of your business if needed.
Small Business Dangers - According to the SBA
According to the Small Business Administration, only 2/3 of all new businesses survive for two years and only 44% survive four years or more. With the odds fighting against your survival, you need to leverage every advantage you can to make the most of your new business. By avoiding these five dangers of opening a new business, you increase your chances of beating the odds and succeeding at your new business venture.