Article was written by Herb Kimble .
Small business owners often make their biggest mistakes before they even open their doors. These tend to be costly mistakes and the reasons why between 90% and 95% of new businesses fail during the first year.
Before starting out, many prospective owners don’t conduct a written feasibility study to determine the potential market and profitability for their business. Even the most original businesses, run by incredibly talented people fail because the market potential is too low, operating costs are too high, or for some other unforeseen reason. That’s why successful large businesses never start a new venture or launch a new product before doing an in-depth study to determine it’s likelihood for success.
A feasibility study for a small business simply analyzes the need for the product, potential market size and share, plus the anticipated revenue and profits. Usually, the feasibility study will pinpoint factors that need to be looked at more closely before time and money are committed to starting a business.
It’s no secret that lack of sales is the main reason businesses fail. Even though sales are the lifeblood of every business, their importance in a business start-up situation is often overlooked.
Not everybody is a good salesman. In fact, most of us aren’t and if our livelihood depended on our ability to sell, we’d probably starve. That’s because many of us can’t or don’t like to sell. Business owners are no exception.
Just being an outgoing “people person, or having a way with people isn’t selling. Selling involves prospecting, presenting and closing. And that takes time. If you’re starting a business and don’t have the talent, time or desire to sell, better hire someone who has. This holds true for any business whether it’s a retail shop, a law firm or a multilevel marketing venture.
Regardless of size, every successful business needs a solid business plan containing sections dealing specifically with advertising and marketing, sales, pricing, product development and distribution, and of course, finances. The business plan serves as a road map to keep a business on a profitable course. Yet many owners start a business without a plan, or if they have one, never update it or stick too it. Working without a solid, current business plan would be like setting off to sea on a boat without charts, a compass, radar, sonar and a radio. You’re bound to run into trouble and have a tough time getting out of it.
Advertising is another area where small businesses very often make mistakes. Instead of viewing it as an ongoing investment that produces revenue for their business, they consider advertising a necessary expense. Small businesses with this mindset usually advertise only when it’s “necessary”, which is usually too late. Advertising needs to be ongoing and consistent to produce the desired results.
Many small businesses also don’t track and measure the effectiveness of their advertising. In many cases, it’s as simple as getting a separate toll-free number for sales, adding a shopping cart feature to the web site, putting unique codes in print ad coupons, or simply asking every customer the simple question “Where did you hear about us?” It’s amazing how much these little things can tell a business how effective their advertising is, where their customers are coming from, and where they should and should not be spending their money.
In today’s fast-paced world, it’s becoming increasingly difficult for a business to know its customers, from both a marketing and a personal perspective. Fifty years ago, most small businesses knew their customers needs very well and had personal relations hips with many of them. Now small businesses have become more impersonal and have been losing customers as a result. Or missing out on creating a major competitive advantage for themselves. Small business owners always complain about having to compete with bigger businesses. Raising their customer service to a higher, more personal level is one important way to create brand and customer loyalty and differentiate themselves from big business.
Small businesses also tend to view their customers as one mass market rather than as a group of market segments, each with different needs. A small computer services company very often doesn’t realize that the small local ad agencies and design studios they serve have very different needs than the local law firm, restaurants or retail stores, and vice versa. A retail fashion store in a small town very often sees one “local” market and not a diverse clientele consisting of different segments such as managerial women, working girls, and upscale stay-at-home moms – each with responding to different product appeals and price points.
Too often, people who have devoted all their energy, talent and money into building a business rely on their “gut” feeling to make important business decisions rather than on facts. As a result, they make costly mistakes or lose out on a profitable new opportunity because they don’t take the time to “test” different price structures, new product offerings or new market segments. Simply taking the time to test anything new or the reliability of your “gut feeling” can improve profits and present mistakes.
Finally, many business owners feel they have to do everything themselves – even if they aren’t the best qualified to do the job. Whether it’s because they don’t want to spend the money, are afraid to delegate the job to someone else, or for some unknown purely egocentric reasons, they waste time and ultimately money doing a job someone else can do better.
Sometimes, regardless of our business or its size, it pays to step back and let another opinion. Not only because someone else might have a new and better idea – but we all need to relax and smell the roses as the saying goes- and take some time to enjoy the fruits of our labors. Whatever they may be.
This article was written by Herb Kimble. Herb Kimble is the founder of CineFocus Productions, a film production company in Los Angeles and Urban Flix, a streaming network that specializes in multi-cultural content. For more info, about Herb Kimble, visit his Facebook