According to so some studies, 20% of newly established businesses fail in the first two years of operation, and almost half of the remaining, will not survive beyond the fifth year. This is because the process of starting and running a business is not easy. There are many options to think about and critical decisions to make.
One crucial decision is about the business structure. The entrepreneur could choose to form a sole proprietorship, partnership, a limited liability company (LLC), etc.
So, what are some common mistakes you need to avoid when starting a business?
Not Understanding Your Target Market
When starting a business, some people don’t take their time to understand the customers or the market. The best way to know you are making the right steps, it by getting constant feedback from prospective or current customers. At times, building a great product might not lead to a successful business. Some companies focus on a small market but build a big business.
Underestimating Capital Requirements
Many entrepreneurs underestimate how far they can go with a certain amount of money. They forget to include unknown costs, delays, or challenges along the way. When starting a business, many people consider the best-case scenario which rarely happens. Such a mentality is attributed to positivity, which has its place. With capital, however, it is advisable to get more than the ideal amount to absorb any unplanned financial shocks.
Partnering With Wrong Investors
It is important to know that investors are not just financial backers. The first choice of investors can either break or make a business. These are people who have put their confidence in a businesses’ potential despite not having proof of the concept presented to them. After undergoing the seed funding phase, there will be a need to interact with them as they examine the sustainability and growth of the business.
Doing Everything Yourself
Many people tend to work alone and independently without bringing others on board. However, it would help to find seasoned, trustworthy advisors to discuss business ideas, challenges, strategy, and progress. This is because power and wisdom exist where there are multiple opinions. Approach three to seven people, and have them join the company as your advisors. That way, you can get continuous feedback to avoid making mistakes in the decision-making process.