About 20% of small businesses don't survive their first year in business, according to the Bureau of Labor Statistics; half of small businesses fail in their fifth year. What can you do to prevent your startup from becoming one of these statistics?
Startup success isn't a matter of luck. It takes planning, passion and hard work to get your startup off the ground — and more of the same to keep it going. While there are no guarantees of success, avoiding these five startup mistakes can greatly increase the odds.
Startup Mistake 1: Not doing market research
Some startup entrepreneurs fall so in love with their business ideas that they don't bother to do market research to see if others feel the same way. In one survey of business founders, 42% of failed startups went out of business because there was no market for their products or services. No matter how much you, your family, and your friends like your new business idea, do some research into your potential target market and your competition to make sure it’s actually viable.
Startup Mistake 2: Pricing your product or service incorrectly
Pricing your product or service is a tricky task for a new business owner. Price too high, and you can price yourself out of the market. Price too low, and you won't make enough profit to sustain your startup. Industry associations and publications can help you find average overhead, profit margins and prices for your industry, as can a survey of what your competitors are charging. There’s inevitably some trial and error associated with pricing at first, but as your business takes off, you'll get a better sense of what to charge and feel more comfortable adjusting your prices as needed.
Startup Mistake 3: Not promoting your business
Without marketing and advertising, no one will know your new business exists. Invest in professional marketing materials, such as a business website, business cards, brochures and whatever else is necessary in your industry. It's important to present a consistent brand image. Even your email address and email signature can help to promote your business. Using a professional email address that incorporates your business’s website domain name will show others that you mean business. It will also help you get a better response to your business emails and start using email marketing. (Learn more about how to make business email marketing work for you.)
Startup Mistake 4: Running out of money
If you expect your startup business to begin turning a profit immediately, you’d better adjust your expectations. Most new businesses take six to 18 months to generate a profit, and you’ll need enough startup capital to get you through that period. Writing a business plan will help you estimate your financial needs. Be conservative in projecting your sales and income, as well as in your spending. Don’t waste your precious capital on unnecessary expenses like fancy office furniture or leasing an expensive car.
Startup Mistake 5: Trying to do everything yourself
As startup business owner, you’ll definitely have to do a lot of things yourself, from making sales calls and planning strategy to sending invoices and buying office supplies. But trying to spread yourself too thin will backfire when you burn out. Budget enough money to outsource at least some of the tasks you’re not good at. Otherwise, you won't have time to take care of your customers. Launching your business with a partner whose skills and experience complement yours is another way to share the workload.
Steer clear of these five frequent startup mistakes, and your business will be much better positioned to thrive.