Although there are many reasons why small businesses fail, one of the most common mistakes occur right from the very beginning — choosing the business idea. A lot of people simply make the wrong choice. To help you avoid that error, here’s a look at four of the top reasons why wrong choices are made:
Failing to Verify Market Demand
Success comes more easily if you do what you love. However, passion for a particular activity or product is not enough basis to start a business. You need to examine the market potential, competition, resources required to enter the market, and uniqueness of the idea. Most importantly, you need to consider the potential demand of your market. Turning your hobby or interest into a small business, for example, without first finding out if there is sufficient demand for the product or service is a sure way to fail. While there are exceptions to this rule, many hobby-based businesses have narrow and extremely segmented market that may not be able to support the business. Determining the potential demand and size of the market for your product is the first factor in choosing a business.
Starting the Business Without Adequate Planning
Starting a business is not something that you plunge head-on without stopping to think. You need to plan every step, every action, and every little decision that you make. Your success is not guaranteed because you have found a market opportunity that takes advantage of your skills and experience. Many home business owners are guilty of taking the process of business planning for granted. A well-written business plan provides the strategy map of your business. Following a good, distinctive strategy will ensure that the business follows a consistent direction towards your goals.
Resisting the Urge to Ask for Help
Most people do not usually ask for advice in choosing a business, either because they are too proud, afraid someone else will steal their idea, or simply don’t know help is available. Help is out there; you just need to look for it. The non-profit organization, SCORE, in cooperation with the Small Business Administration, has chapters and offices all over the country and provides advice to budding entrepreneurs for free. Other small business entrepreneurs are all too willing to tell you the lessons that they have learned in starting a business – provided of course that you are not a direct competitor or asking for trade secrets. If you cannot find a knowledgeable person willing to give you information about the business, you can always work as an employee or an intern in a similar business. Not only will you be receiving compensation, but also you are getting on-the-job training and valuable insights on the business that you want. One word of caution: good advice is always helpful, but don’t let other people tell you how to run your business.
Trying to Start a Business with Too Little Money
You may have the passion for the business that you are planning to start, but can you afford the business? Is the cost of your business within your reach? Where will you secure funding to support your production, marketing and operations? If you do not have the cash to support your venture, there is a high likelihood that your business will end up as a failed start-up.
Recommended Books on Mistakes in Business:
- Forbes Best Business Mistakes: How Today’s Top Business Leaders Turned Missteps into Success
- Don’t Let The Irs Destroy Your Small Business: Seventy-six Mistakes To Avoid
- 10 Ways to Put Yourself Out of Business: An In-Depth Look at the 10 Biggest Mistakes a Business Owner Will Make and How to Avoid Them
- 43 Mistakes Every Business Makes…and How to Avoid Them
- Do As I Say, Not As I Did!: Gaining Wisdom In Business Through The Mistakes Of Highly Successful People
- EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches