Starting a business is not something to be taken lightly. It is fraught with all sorts of challenges that come up along the way, which is why the first year is such a critical period. Many entrepreneurs don't make it past that first delicate stage, letting the common pitfalls of entrepreneurship swallow them up.
Understanding these pitfalls ahead of time, however, can make a significant difference in how well you weather them. To help your business not only survive but downright thrive, here are some of the biggest mistakes that businesses make within their first year.
Underestimating Their Cash Flow Needs
Right up at the top, as one of the most common reasons businesses fail is the most obvious— they run out of money. Many of them underestimate just how much equipment they will need to keep their operations running smoothly. They also often underestimate just how long it will take to become profitable.
After all, there are slow cycles, off-seasons, and ultimately unexpected expenses that can pop up when you least expect them. Cash flow is essential for covering not only your everyday expenses but also anticipating any emergencies that require funding right away.
This is why you need a detailed cash flow projection from the get-go, to ensure you have enough money to cover whatever you need. Make sure that you are tracking every expense and projected expense and secure funding to provide an additional financial cushion.
Not Knowing Their Customer
One of the biggest rookie mistakes is assuming that all customers are built the same. You may launch a product that you are passionate about however, just because you are passionate about it doesn't necessarily mean that your customers will be! You have to understand who your target audience is and what it is that they are after. Conduct thorough market research and define your ideal customer to ensure that you are going to successfully address their pain points. Failing to do this can significantly waste your resources, and ultimately lose customers' interests, sending them to the competition.
Taking On Too Much
In the early stages, business owners may do as much as possible themselves to avoid having to take on extra staff. After all, this may even seem like a strategic idea to solve their cash flow concerns. However, wearing too many hats can lead to mistakes and ultimately missed opportunities. You have to recognize your own strengths and hand off the rest to those who are capable of taking it on.
Outsourcing tasks like marketing or administrative work can make a world of difference in how your business performs. Handing off these kinds of tasks that you are less qualified for will allow you to shine and focus on more revenue-driving tasks like product development.
