Small businesses (employing no more than 20 people) provide approximately half of this country’s private sector employment opportunities. They account for close to 35% of the revenue generated by the private business sector. Studies conducted by the University of Queensland indicate that at any given time, approximately 500,000 Australians are actively involved in setting up new ventures and are trying to get new business enterprises off the ground.
If you’re ready and willing to give entrepreneurship a go, you’ll need to be aware of the most dangerous pitfalls that can stall a fledgling operation before it has a chance to take off.
Pitfalls every new business owner should note
1. Bad location
While e-commerce and efficient delivery services make physical location less of an issue in today’s business world, location still plays a significant role in enterprises like hospitality and personal services. When a shop (like a restaurant or beauty salon) relies primarily on pedestrian traffic for patronage, choosing the right location becomes critical to its success. Shop space in malls can be terribly expensive but can provide high levels of shopping traffic every day. As the business owner, you will need to decide whether it’s worthwhile to the operation you intend to set up.
2. Single founder/ solopreneur
It would appear that the more human capital behind a business venture, the higher the probability that the enterprise will succeed. The better educated and more experienced the business’ founders are, the more likely they will make good in their undertaking.
Experts actually recommend forming dedicated teams for running new businesses because creating such alliances can bring together the correct combination of expertise and experience required to make an enterprise fly.
3. Not enough capital
Seventy-two percent of small business owners in Australia start by using their personal savings to go into business. The remainder use credit cards and personal-secured bank loans as a source of capital.
The important thing to remember is that you need to have enough capital to sustain operations until it starts making a profit. It takes a bit of research and planning to accurately determine how much capital a new business will need to survive until it starts making money, but this is time and effort well spent.
4. Hiring the wrong employees
Experienced owners will tell you that nothing kills a business faster than having the wrong people on the job. Good people are hard to find, not because of any shortage of skilled or educated candidates, but because every business is different. Each one demands specific skill sets and varying levels of dedication to grow. Taking the time to match a candidate to the job pays handsome dividends in the long run.
5. Not putting in enough effort
Some entrepreneurs have likened the process of starting a new business to the intricacy inherent to raising a child, and there is a lot of truth behind the analogy. Just as a responsible parent can never overlook the needs of a child, the committed entrepreneur should always be mindful of what the business demands, and make every effort to provide for these needs.
Does the enterprise require more marketing and promotional support? Then the owner needs to determine exactly what measures need to be adopted to address this deficiency. Does the momentum of operations point toward expansion? Then the owner needs to assiduously plan to take on additional staff, decide whether to expand the business’ premises or perhaps set up shop in new locations. Identifying competitors’ data assets through data valuation efforts should be a good start in determining your business potential.
6. Choosing the wrong business structure
Business coaches have always made it a point to recommend the correct business structure for business startups, and with good reason. Choosing the right organisational platform to run an enterprise can have serious and far-reaching tax implications, which ultimately impact the operation’s bottom line. Ideally, a new business owner should consult with an accountant to determine whether a new business should be set up as a sole trader, a partnership, a corporation, or even as a family trust.
7. Inadequate planning
The next best thing to see what the future has in store is proper planning. At no time has this been more evident than during the onset of the COVID-19 pandemic.
The moral here is – hope for the best, but plan for the worst. Having a plan for handling the worst possible scenarios can keep a business owner from losing their head (and shirt) when a crisis rears its ugly head.
8. Targeting the wrong audience
Smart business owners know exactly who their products and services are for, and they continuously strive to refine their targeting to a laser focus. If you own a bar or a restaurant, you need to figure out who your perfect customers should be, and concentrate your marketing and promotional efforts towards attracting these ideal clients. If you run a retail enterprise, you need to have an accurate idea of who comes into your store and buys what from you. Otherwise, you waste time and effort trying to provide the correct incentives and create the ideal customer experience.
9. Poor internal management
Every aspect of a business operation needs to be governed by fiduciary acumen. Business owners need to be constantly aware of their duties and responsibilities towards the public they serve. They need to understand that their success or failure depends entirely upon their ability to provide useful products and timely service to their customers.
This makes strategic management easier and should dictate every policy that a business enterprise adopts. Creating a broad base of satisfied clients ultimately permits a business to grow and prosper, both through good times and bad.
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