Some of the greatest entrepreneurs – such as Steve Jobs – have been very vocal about the mistakes and miscalculated business moves they made in their careers. Mistakes can be valuable as you drive your business forward. As Steve Jobs’ sister stated, “He was never embarrassed about working hard, even if the results were failures. If someone as smart as Steve wasn’t ashamed to admit trying, maybe I didn’t have to be.”
While mistakes come in all shapes and sizes, they tend to fall into four categories for small business owners. Here are the most common ones and tips to avoid them:
Business Plan Mistakes
- Overestimating your profits. According to a survey by insurance company Hiscox USA, more than 30 percent of small business owners under-estimate project operating expenses. Additionally, many companies forget to estimate payroll withholdings (such as Medicare, Social Security, unemployment insurance and income tax), which can cause a 25 percent discrepancy in company earnings. Be sure to consider all your costs.
- Envisioning an unrealistic market for new product or service launches. Promising to get a small percentage of a multi-billion-dollar market, to reach a global market within the first year, or to appeal to all demographics with a product can be major red flags to investors at any stage in a business’s development. Paint a clear picture of your target market.
- Rushing to get a business plan written. Nobody should be reading your business plan until you have ensured that it is clearly and grammatically written. Also, be certain you've covered all of the key areas investors want to see, including the problem your idea will solve, a clear delineation of your market, realistic sales projections, biographies of your senior team and an argument for scalability.
- Looking at a new project or business growth idea through rose-colored glasses. Smart employees will actually be more likely to get on board with a new initiative if you present both the positive and the negative possible outcomes. Demonstrate that you’ve thought through the project and understand the pros and cons of taking it on.
- Neglecting to acknowledge that your employees have feelings. Staff will respond much better to criticism if it is presented as a learning experience and if they are not chastised in front of their peers. You may forget about a negative interaction the next day, but the person on the receiving end may remember it for a long time.
- Overlooking untapped talent. If you always award plum projects to the same handful of company “stars,” you may be missing out on innovative thinking and fresh ideas. You never know who will generate the next groundbreaking idea.
Product Development Mistakes
- Missing the mark on pricing. Figuring out what price to charge for your products may seem like second nature. In fact, many businesses may not be maximizing profits because their prices are too low. It is better to do intensive research on competitive pricing and find a real differentiator for yourself than to set yourself apart on price. Further, selling fewer units at a higher margin is often more conducive to long-term business viability than selling in volume.
- Overcomplicating your product description. This is a major pitfall, particularly in technology-based businesses. Be sure to avoid jargon, eliminate hollow-sounding platitudes like “cutting-edge,” and construct your description around a problem your customer has that will be solved by your product.
- Losing business because you don’t start selling while your product is in development. It may not be appropriate in all industries to sell before your product is ready to be launched. However, sometimes talking to customers before a product is finalized makes good business sense. If you are struggling with which features will have the most currency, it is a good idea to incorporate customer feedback that you receive.
New Media Mistakes
- Ignoring social media etiquette. You may have realized that you need to be using some form of social media, but do you know what is considered acceptable behavior for businesses? Here are some simple dos and don’ts:
- Do make it a two-way conversation and encourage customers to engage with your content. And be sure to respond in a timely manner (typically within 24 hours).
- Don’t jump to a sales attempt before building a customer relationship, post just to avoid silence or disclose pricing details on social networking forums.
- Taking blogging too lightly. While a lighthearted tone in a blog is fine, underestimating its impact can be quite serious. If you don’t write well, assign a staff member who is a stronger writer to develop your blog content based on your guidance. If you have a new idea about your industry, don’t present it as fact but put it forth for discussion and debate. If you want your blog to gain popularity in your industry, invest in analytics tools that will give you feedback on which posts are being read, how customers are finding you on the web and what kind of customer is reading your blog.
Mistakes are inevitable. The more risks you take, the more mistakes you will likely make along the way. Nevertheless, you don’t need to learn only from mistakes that you make directly – you can learn from others’ mistakes as well. Please share the business mistakes you’ve made and the lessons you’ve learned as a small business owner with the SBOC community below.