Top Mistakes to Avoid when Starting a Small Business

Mistakes to avoid when starting a small business
Table of Contents


    You want to start your business. It has been your dream and you expect things to click immediately. You currently have a paid job. You work for someone but want to explore the entrepreneur life. The truth is that insufficient preparations can lead to disastrous consequences. Starting a business might be harder than you think, but how can you succeed and avoid making costly mistakes?

    Before you decide to start your own business, there are some mistakes you need to avoid. Let’s see some of these costly mistakes you need to avoid and what you should do instead when transitioning from a paid job to starting your small business.

    Key Takeaways

    • Being a small business owner comes with challenges so you need to give yourself an edge.
    • It is important to conduct market research before you start your small business as this helps you to determine if your business idea is feasible or not.
    • Starting organic marketing early is essential for business success.

    Not Having a Business Plan

    Many people underrate the importance of writing a business plan. They believe that having an idea is all that matters. This is not true and you must avoid making that mistake. Writing out your idea and conducting research around it remains the best way to determine how feasible your small business will be.

    Being a small business owner comes with challenges so you need to give yourself an edge. Many small business owners begin without thinking about what to expect. They know nothing about their new industry, the financials, or a business model and not understanding these can cost them money, time, and effort. They don’t have a mission statement to hold on to when things go wrong too.  

    Avoid making this mistake by having a business plan before you start your business. 

    Following the ‘Do What You Love’ Bandwagon

    While it is pretty good to do what you love, it is more important to do what you are good at and can make money from. Someone who loves to cook might not be good at it. Also, someone who is very good at fixing things might not love doing it. 

    It is important that you consider how what you love can turn into what you are good at. This can also turn into what you can make profits from. Isn’t making money the sole purpose for wanting to start your own business?

    Not Conducting any Market Research

    Avoid falling into the trap of not conducting market research before you start your small business. How can you determine if your business idea is feasible or not? As already mentioned, your idea must be profitable. You can’t force people to accept your idea. You need to know if there is already a budding or competitive niche market for your small business and understand how you can position yourself in the market.

    Not Knowing Your Target Audience

    Knowing your customers is very important. Have your ideal customer and build buyer personas or profiles based on your customer’s pain points and your product’s benefits. If your small business will offer a number of products, make sure you create different buyer personas for them. 

    Not Knowing Your Competitors

    Not knowing your competitors or ignoring them can be one of the most dangerous decisions you can make. Imagine you decide to sell your burger for $5 a piece, but the next-door store sells theirs for $3. The quality is the same but your price is on the high side. Which do you think potential customers will swarm to?

    Knowing your competitors helps you to anticipate what challenges lie ahead for your small business. It is wise to conduct competitive research to check your competitors’ strengths and weaknesses and make sure that your business doesn’t repeat its mistakes.

    Another aspect of doing competitor analysis is knowing the popularity of your niche market. How popular is the market? Is there a saturation or are there limited businesses? You need to know all of this. 

    Not Keeping Accurate Business Records

    One of the mistakes you can make as a small business owner is failing to keep an accurate business record. In other words, you fail to track your financial expenses. This can put your small enterprise into problems. Keeping accurate business records is time-consuming, however, it is worth it. 

    Why are accurate business records important? It is because small business owners can lose their tax deductions when audited by the IRS. So, without an accurate financial record, you will face severe tax implications.

    So, how can you keep an accurate record? There are different bookkeeping and accounting software that can help you with this. You can also hire a bookkeeper to help you out too.

    Not Choosing the Right Entity

    Some people make the mistake of not organizing their business legally. They do not bother to register their business entity at all. This results in several liability drawbacks. For instance, a lender can take possession of your personal assets even if you borrowed a loan for your business. Or you can be sued for accidents that occur in your business establishment and you will be the sole individual to bear the costs.

    So, how can you avoid liabilities?

    It is by incorporating your business as an LLC or limited liability company. Doing this differentiates you from your business. Lenders can not take possession of your personal assets and you wouldn’t have to bear the brunt of any accidents that happen in your office.

    Not Protecting Your Intellectual Property

    Every business has intellectual property and failure to protect this legally can be expensive. Intellectual property can be your business name, slogan, logo, or anything that you specifically use to market your product or service. It is important that you register your intellectual property so no one can use it. Failure to protect your intellectual property makes it possible for others to use it for free.

    Not Understanding What You Want to Sell or Do

    Is it possible to not understand what you are selling or the service you wish to render? For instance, imagine you want to sell beauty products but don’t know the main components of the products and the benefits; how would you successfully market the products? It is necessary to understand what you are selling so you can craft your unique value proposition or unique selling point. Let people know your business as knowledgeable and one that understands the needs of customers. 

    Not Charging Right for Your Product or Service

    Another mistake many small business owners make is not charging their products or services right. It is true that charging lesser than your competition will get you customers, but this is not always the case. Depending on your niche, most customers are more concerned about the quality of service or product than the price. So, don’t undersell yourself. Know how much your business is worth.

    One of the best ways to determine how much to charge is to experiment with different price structures. Choose the one that works best and brings in more customers. Remember that you deserve to be paid well for your services. 

    Not Having a Legal Agreement for Contracts

    Not having a legal agreement for contracts is like driving a car without a seatbelt. Things will not go haywire as far as you do not have an accident. Just having a written or oral agreement with your client is nothing when a disagreement happens and you are taken to court.

    So, what can you do? 

    By all means, consider a legal agreement for contracts. This agreement should include what services you provide, the deadline, and how much you expect to be paid. This can be a legal lifeline. If you were to be sued in court by your client, that agreement can show your legal duties to each other. 

    Not Having a Cash Flow

    The majority of new small business owners will not gain any profits for some years. This means that you will have to rely on some funds to get the business established and to survive and grow. 

    Not having a cash flow before starting a new business is a big mistake you must avoid. You can get funds through loans or from trusted family members and friends. Perhaps, you can apply for a grant or look for alternate ways to fund your business.

    Here are some alternative ways to get funding for your small business:

    • Start your business part-time while retaining your paid job for a while. Think of this as using your paid job to fund your new business.
    • Save enough money to give your small business a financial boost.
    • Get a loan that can help fund your startup.
    • Use your credit cards to cover the costs of starting your new business.
    • Raise money through a crowdfunding campaign.

    Not Investing in Organic Marketing

    Many small businesses shy away from spending money on marketing. If you are like that, then do not worry. Paid marketing is not the only way to make your small business known to others. You can always go for organic marketing first. 

    Organic marketing is very excellent. It can be in person or online. And what is more, it is totally free! You wouldn’t pay a dime to make it possible. However, it takes a number of weeks or months before you notice its effect. 

    Before you start your organic marketing, it is important that you create a marketing plan and come up with different marketing strategies that can help. As a form of advice, smallbusinesstroubles recommend that you market your small business before you start it. You can do so via word-of-mouth marketing and online marketing. Open a social media page or pages for your business, open a website, and take blogging seriously and you are on the right track to being a successful business owner.

    Branding and marketing yourself organically can be more effective than paid marketing, but it takes time so do not rush the process. It is important that you take paid marketing seriously if you want a boost to your business’s success. 

    Not Asking for Help

    Starting your business alone is not the issue, but doing everything yourself to make the business succeed is where the problem lies. No man is an island. You need others to grow. You need to outsource some of the important tasks in your small business to others. There are people out there that will gladly assist you for a reasonable price.

    Learn how to hire the best talent for some tasks at affordable prices. If you do some things yourself without experience, let’s say, accounting or taxes, you might get into financial trouble. 


    Proper preparation for the worst or the best will lead to success. If you make out time to conduct market research, understand your competitors, know your target audience, take the necessary steps to legalize your business, market your brand, and avoid doing everything yourself, you will transition from your paid job to your small business with ease.

    Frequently Asked Questions (FAQs)

    What is the most common mistake many small business owners make?

    Lack of preparation. Many love the idea of being self-dependent or being an entrepreneur. They fail to prepare and just jump right into it. Without taking time to understand their business niche market, competitors, and target audience and not having enough capital, their business is bound to fail.

    What first step should I take when starting my own business?

    Conducting market research is the first step you must take when starting your small business. Doing this gives you an idea of how the market is, who your customers are, your competitors, and in general, how profitable your niche market is.