Pitfalls to avoid when starting a small business

Before you write that business plan, and seek financing, do your research first. Ask question like the following:
What kind of business do I want to start?
How are businesses like it doing?
Is there a need for this particular type of business in town?
Who will be the competitor?

What makes this product or service unique and in demand?
Who will be its customers?
What are their demographics?
What are their buying habits? Disposable income?
What does the customer want and need?
How can my company fill the customers' needs?

Once you've establish who your future customer will be, then write your business plan. Writing a business plan should take a lot of time and thought. Your business plan should state the type of business it will be, goals for your business, a vision statement, a marketing plan, who the stakeholders are, and an operational plan.

The business plan will help you to acquire financing, and give you some direction. And at times get you back on track. An excellent resource to use is the Small Business Administration. There people can assist you in writing the business plan, loans and grant applications and a mentor to advise you and examine the business.

Other considerations are:
Is this an established business, or a new business? It is easier to take over an existing business than start a new one.
How many employees will you have?
Do you have an employee policy?
Do you have a job description in place for employees?
What do you look for in future employees?
Are you good at documenting problems?
Are you consistency in application of policies?
Do you tend to give preferential treatment to certain employees?
Are you familiar with state regulations regarding employees?
Who will do the bookkeeping? You or a paid bookkeeper?

An inability to generate sales is the number one reason businesses fail. It doesn't matter if your business is a service, as a hair salon, or retail business, as an antique shop, it has to have sales and turnover of merchandise or services to survive.

Second on the pitfall list is cash flow. This includes sales, marketing expense, salaries, bill paying, and money to purchase supplies and merchandise. All of this should have been written into the business plan under operational.

Other pitfalls for new businesses are:
Excessive personal drawings from the business rather than reinvesting
Not planning for growth
Too small customer base
Pricing problems
No experience running a business
Lack of inventory control
Taking on a business partner
Thinking too small
Poor location

Successful businesses don't just happen, success is planned. Edward Rickenbacker, businessman and WWII hero, said "I can give you a six-word formula for success: "Think things through then follow through."

Learn more about this author, Mary Byrd.
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