Top 7 Most Common Mistakes SMBs Make

smbs mistakes

What are we talking about in this article?

Entrepreneurship is an exciting venture, and in today’s age of startups, it seems like the ultimate dream. But data from the Bureau of Labor Statistics (BLS) shows that approximately 20% of new businesses fail within their first two years, and roughly half fail by the end of their fifth year of existence.

Over time, the demands of entrepreneurship can become overwhelming for some. Others may underestimate what it will take to run a successful business. And this can take a toll.

To that end, we’ve rounded up seven of the most common mistakes small businesses make — and what to do to rectify them.

Project Profitability

What are the most common mistakes SMBs make?

1. Not writing a business plan

A business plan is the foundation of any entrepreneurship venture. When you skip this crucial planning phase, you will lack direction and infrastructure, both of which are critical for sustaining your startup in the short- and long-term.

Your business plan lays out your ideas in a clear and operable manner. It defines your goals and measures for success. It also incorporates extensive research to demonstrate that your ideas are viable and presents a solution that doesn’t already exist — or does something that already exists even better.

This document will guide your organization through the development phase, and you should continue to use it to refer back to as you structure your venture. It addresses every overarching aspect of your startup, including your marketing plan, financial information, benchmarks, business needs, and KPIs.

The major components of a business plan are:

  1. Executive summary
  2. Description of the organization
  3. Market and competitive analysis
  4. Marketing strategy
  5. Management description
  6. Financial information
  7. Products and/or services
  8. Operation plan
  9. Sales and distribution
  10. Funding and projections

2. Not setting SMART goals

SMART goals are structures businesses and individuals alike employ when laying out and creating a strategy to reach their objectives in work and in life. The acronym stands for:

Specific

Measurable

Actionable/achievable

Realistic

Time-bound

When you’re setting your goals, use this system as a guide to ensure that your business objectives meet all of these specifications so you, again, have a clear direction and a means for meeting them.

3. Attempting to do it all on your own

Running a business takes time — a lot of time. And as much as you might like to, you simply cannot do it alone. It’s a big mistake to see yourself as the lone wolf in your concept. The solution is to rely on your two greatest assets: people and technology.

When you’re building or running a business, look for the employees and partners who offer expertise in their areas — marketing and sales, software development, finance, creativity, and so on. You, of course, have certain skillsets, but you don’t have every single competency it takes to make a successful business, and professionals who have additional qualities can fill in the gaps.

In other words, surround yourself with talent. You and your team can work together and complement one another. You can also solicit feedback and improve your operations, products, and services in order to better meet the needs of your consumers or prospective consumers.

Technology is also crucial to your venture. Armed with a variety of programs and tools, you can become more efficient, and your operations will be more cost-effective. Take the time to research the options for different systems, such as project management software and a customer relationship management (CRM) system.

Project Management

Ensure that your team is trained on how to use new technology, too, so that you can adopt them quickly and keep everything running smoothly.

New small business owners — and seasoned ones — should turn to anyone (and anything) they can for help. This will free up time for them to focus on their core business functions and responsibilities.

4. Not investing in organic marketing

Marketing encompasses a wide range of activities, from social media posts to paid websites and print advertisements to search engine marketing (SEM). While both organic and inorganic marketing strategies are important to your organization’s success, too often, businesses rely heavily on inorganic digital marketing campaigns, such as sponsored posts and paid advertisements.

That’s not to say inorganic marketing doesn’t have its place — it can be very helpful for targeting key demographics. But organic marketing is a critical component of your strategy, too. You want to generate word-of-mouth referrals and a positive first impression when people come across your collateral and website. This will help you create a better reputation and build your brand.

One of the benefits of organic marketing is that it’s far less costly to implement. Plus, you can be very creative when exploring ideas. Just a few of the many examples include:

  • Leveraging unpaid social media posts and content on platforms like Instagram, Facebook, Twitter, TikTok, LinkedIn, and YouTube
  • Optimizing your website and digital channels for SEO
  • Writing blog posts with content relevant to your organization
  • Asking thought leaders to write guest blog posts
  • Creating community forums for users to ask questions and engage with one another
  • Delivering regular newsletters with updates and meaningful content
  • Writing guest posts for other organizations
  • Posting case studies and infographics

5. Not knowing your target audience

When you’re building or growing your company, your target audience — that is, your current and potential customers — should be at the forefront of your mind at all times. All of your efforts should be in service to making your brand and specific products or services appeal to your ideal customer. You want to connect to these individuals.

This is where market research enters the picture. When you conduct this research, through methods like focus groups, surveys, and more, you’ll get a better sense of how your target audience responds to your ideas and adjust them accordingly.

You should also create consumer personas (or buyer personas), which will represent your ideal consumers. The personas are built around the consumer’s goals, likes, dislikes, and history. Using these tools will allow you to better formulate products and services that appeal to your buyers’ interests and formulate a marketing strategy accordingly.

Time tracking & estimation

6. Undervaluing your products or services

At the beginning of a new venture, you worry about your product — and business as a whole — being successful. This, unfortunately, sometimes leads entrepreneurs to undervalue their products or services, giving them a lower price tag than they are truly worth.

But doing so will have both long- and short-term consequences. It takes a while before you should start to see a profit, and if you lowball your company early on, you’ll not only delay profit even further but may prevent yourself from reaping the rewards of your efforts down the road.

Work with your team, and get expert advice on how to best price your goods. Look at competitors in your industry to see what they’re doing, too.

Does this mean you shouldn’t try to lure consumers with great deals? No! Just be careful about pricing, ensuring that it is fair and will deliver your business a profit.

7. Overspending/underspending

For many entrepreneurs, math isn’t necessarily at the forefront of their minds when they start their small businesses. But it’s very important. In order to successfully launch and grow your startup, you must pay close attention to your cash flow.

Shopify reports that small businesses spend an average of $40,000 in their first year. This can be broken down into operation, product and services costs, marketing and advertising, digital needs, and employee salaries.

Whatever your sources of funding, it’s important to do careful bookkeeping and accounting — which probably involves employing a professional — to keep track of expenses and profits. Research options for your startup costs. Look for cost-effective solutions.

At the same time, avoid underspending. Again, you do need a team to support you, so don’t skimp on personnel — although your full-time employee base may be limited early on. It’s a delicate balance, but you need to ensure you’re investing in quality tools and personnel, while simultaneously managing your money such that you’re not using it irresponsibly.

Carefully consider how much to pay yourself, too. This can be difficult to determine, especially early on, but you can look at different models and successful startup leaders to come up with an appropriate salary.

Starting and managing a small business takes energy, time, patience, and a great deal of sacrifice. Don’t fall into the trap of making these all-too-common mistakes. And don’t let your fear of failure prevent you from taking risks — as is often said, no risk means no reward.

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