There is a need to “Work Smart and Not Hard,” and learning the most common mistakes in business from the experience of others and trying to avoid them is wise business management.
Small businesses especially are more likely to fall into the trap of these common mistakes because of limited human, time, or financial resources.
Inadequate Planning is One of The Most Common Mistakes in Business
No-one goes into entrepreneurship planning to fail and most businesses believe they have some sort of a plan. The key question to ask is “Is the planning adequate? Even if the business is a small one, once it ceases to be a hobby, a business plan is necessary.
Unfortunately, many business owners fail to adequately plan, and therefore remain as business operators rather than business owners, constantly struggling through overwhelm and the realm of reacting to issues instead of being proactive.
The business plan is a good foundation on which to build a business. However, planning takes time and resources which, many owners believe is already in short supply but, is a required baseline for success.
A business plan addresses all aspects of the business and therefore its absence is the most important mistake any business can make.
Poor Understanding of The Target Audience
Most small business owners understand their industry, but they generally do not fully understand prevailing market conditions and the needs of their target audience.
Starting a business simply based on a perfectly good idea will eventually inject chaos into a business. While the idea may theoretically sound good it must solve a real-life problem that businesses have.
Clearly defining the target market and target audience helps to ensure that the products and services you desire to offer are a solution to a problem your target audience faces. In other words—offer a solution to one of the most common problems of your target audience.
For many businesses, improving efficiency of systems and processes is a common problem. These can however differ by industry, and only adequate market research will identify this.
To find out who your ideal customers are, you can hold focus groups, survey prospective customers, and even use census data.
Absence of Defined Systems and Processes
Management systems and processes of many smaller businesses came about by default, with add-ons being made with little to no attempt made towards documentation. Such a condition can result in self-inflicted business chaos which in turn causes stagnancy
Underpricing Products and Services
Small business customers and clients are always looking to claw back on prices of many products and services. Giving in to them is not a winning strategy just to have their business. This is one of the most common small business mistakes with service-based businesses.
Setting prices for products and services should not be guesswork. Low balling to get clients will mean running at a loss which eventually will destroy the viability of the company.
Prices must be high enough to make a profit and should be calculated by using industry benchmarks in conjunction with the company’s sales and financial projections.
Higher prices can only be justified if there is greater added value, so, to operate above the competition, the customer / client must see the great value in the product / service.
Hiring Wrong Team Members
When starting to hire employees to assist with the business, you must make sure that you hire someone who will be a good fit for the company based on your values and the type of culture you desire to create.
Most small businesses do not have the luxury of an HR department, so this role usually falls to the business owner or some other person in authority within the company.
Hiring under pressure without proper evaluation and checks can be a costly exercise if candidates prove to be the wrong fit.
Aside from the obvious cost of time and human resource used to hire a candidate who is a poor fit, such a candidate can a lot of harm to a company by causing limitless strife before they depart.
Furthermore, without a carefully thought out hiring and onboarding process, and systems and processes in place, any good candidate hired will also not stay long with the company.
Lack of True Delegation or Outsourcing
A business that refuses to hire because of cost ends up being swamped with work. The logical direction is usually to get internal employees to do this work over and beyond what they were hired to do, and this can easily backfire – employee attrition due to resignation.
Businesses that hire at this stage of overwhelm usually rush through the hiring and onboarding process and hire a candidate who is a poor fit for the company.
Some business owners are lucky to hire competent help but end up frustrating these employees because they refuse to relinquish authority to them through delegation.
Outsourcing certain tasks that fall outside the competency level of everyone in the business, to third parties, is highly encouraged as this ends up being cheaper, faster and better done in the long run.
Poor Marketing Efforts
Marketing is a condition of doing business and is necessary to build brand awareness and generate leads. It should be viewed as a necessary investment towards growth of the business investment.
Research average benchmark marketing budgets for similar businesses to provide a baseline to work with.
No matter how big or small your company is, marketing is necessary. On average, businesses spend about 7.5% of their total revenue on marketing (Deloitte 2017)
“No Marketing” is One of The Most Common Mistakes in Business
Doing no marketing is not a good option. Initial marketing tactics (even when budget is tight) could include SEO, networking and gaining social media visibility and authority. The marketing budget should be increased as the business grows.
Conclusion – The Most Common Mistakes in Business
There are 6 common mistakes in business, especially for smaller businesses, that can be avoided if there is self-awareness. They should serve as “lessons learned” for many small businesses to ensure they do not fall into these business traps.
References
CMO TODAY – Deloitte (2017) Marketing Budgets vary by industry Wall Street Journal https://deloitte.wsj.com/articles/who-has-the-biggest-marketing-budgets-1485234137
