Starting a small business is a tremendous feat, but every new business owner soon realizes that growing their business can be just as big a challenge if you don’t have the right plan. Here are the top 10 small business growth pitfalls to avoid.
1. Not Fully Committing to the Business
The most basic mistake that can be made is simply not making a full commitment to the business. This may look like working solely for the business if you have the savings or revenue to do so, but many startup entrepreneurs don’t have the funds to do that. At least make the emotional commitment to pull long hours and cut back on spending wherever possible. Anything business that’s worth doing is worth doing right.
2. Undervaluing the Business’ Products or Services
Many new business owners are tempted to price their products or services low, usually in order to lure in initial sales. Be wary of this trap, though, because it can create long-term headaches even if it does provide a short-term boost. Pricing your products so that the profit margin is too thin will leave revenue on the table, and it could make for an unsustainable business model once overhead increases as you grow.
3. Only Vaguely Identifying Your Customer Base
Only a general sense of who your customer is won’t be sufficient, for a vague definition will lead to undefined marketing and sales tactics. You won’t know how to best position your product or service, where to place advertisements for maximum impact, or even where to actually put a physical product that’s for sale.
Spend time identifying your ideal customer, and all of these aspects will come into focus. If you have a few (i.e. 2 - 4) ideal customer types, you can outline each one in a persona. Give your persona a fake name, photo, buying triggers and even income.
4. Delaying Expenditures Too Long
Although the story of a business that’s bootstrapped and succeeds with almost no capital investment is captivating, most of these businesses take a long time to grow. Business owners who scale their businesses quickly usually make monetary investments.
Spending money can be intimidating when you’re working on a budget and don’t have guaranteed sales next month (or even next week). Deliberately invest in your business as soon as you have the funds to do so, and you’ll likely reap the rewards.
5. Extending Beyond Your Core Competencies
Being a small business owner requires wearing multiple hats, but stretching yourself (or your business) too thin doesn’t help growth. Overextending takes time away from what truly grows your business, and operational efficiency decreases when you do tasks that you’re not great at.
Anytime you make a new expenditure, consider what your core competencies are and spend elsewhere. Focus on what you do best, and hire people to do the rest if you can.
6. Taking Care of Bookkeeping and Accounting In-House
Some new small business owners try to manage their own books and taxes, using software tools such as Quicken and TurboTax (among others). While these programs are capable, managing these tasks in-house is typically a mistake even when software is used.
A bookkeeper will attend to the regular task of logging revenues, expenses and payroll (if applicable), and an accountant will answer any complicated tax questions that come up. Having an established relationship with an accountant is also quite helpful if you’re ever audited.
For these reasons, a bookkeeper and an accountant should be two of the first people you outsource to once you’re ready to hire a service like Virtuous Partner. Bookkeeping and accounting is just the tip of what they provide. They excel in helping startups get off the ground and grow.
7. Failing to Use Helpful Software Programs
Although tax software can be more cumbersome than it is helpful, this doesn’t mean all software should be avoided. Business owners who don’t utilize the powerful software programs that are available spend time on things that would otherwise be automated, and they often don’t have as complete records.
Exactly what software is useful to your business depends on the business’ stage, industry and other factors. Project management, proposal management and scheduling software are a few important ones to consider. If you’re really tight on funds, keep in mind that free versions are likely available to get started with.
8. Not Using Customer Relationship Management Software
One of the first applications to set up is customer relationship management (CRM) software. It’s used by 91 percent of companies that have over 11 employees, yet small startups with fewer than 11 employees implement the software much less. Learn from those larger companies, and take advantage of the 871-percent return on investment that it can provide.
HubSpot's Free CRM is a perfect start to managing leads, prospects and customers. It's a perfect complement to solid marketing and sales strategy and will help a growing business stay organized and in-step with new business leads.
9. Skimping on Marketing and Advertising Campaigns
Chances are, if you're a great small business owner, say a landscaper, you are most likely not a marketing professional. Many business owners skimp on their marketing and advertising campaigns, thinking that either other expenses are more important or that they can market themselves. Effective marketing directly drives business growth, though, and this is one area that shouldn’t be overlooked.
In particular, online marketing is more important than ever before. Search engine optimization (SEO), social media marketing (SMM), pay-per-click advertising (PPC) and email marketing are just a few channels that can drive visibility and sales.
The small business administration recommends spending 7-8 percent of revenue on marketing, but that number will likely be higher for a new business. That percent of your future expected revenue might be more applicable.
10. Forecasting Mid-Range Demand Incorrectly
Short-term forecasting might be relatively easy, and long-term forecasting is somewhat less relevant when starting a business. Accurate mid-term forecasting is essential, however, and many business owners get this wrong. Spend some time researching what you realistically will sell in the next 6-12 months, so you can manage supplies, space and inventory well.
Avoid These Small Business Growth Pitfalls
Once you know what these common pitfalls are, avoiding them becomes possible. Don’t make these mistakes, and you’ll have a much better chance of growing your business. We've recently launched a small business consulting and management service to assist your business with these hurdles and organizational management.
Give us a shout for a free consult. We love talking to other small and medium business owners.