“Risk” is synonymous with “business start-up.” Avoiding these risks “disguised” as commonly made mistakes increases the chances of success for small business owners. The blunders small business owners make are countless, but three frequent and potentially crushing mistakes stand out for most new businesses.
Starting Without a Plan
People love the idea of “winging it,” cavalierly bragging about how they will be successful in business using the “seat of the pants” approach because they can fill a need in a selected market. Though the awareness of customer need and the idea to create a solution for it may be very real for someone looking to start a business, the idea of succeeding with only those things is not. This is no longer the “dot com” era of loosely slapped together business plans and mission statements whose depth was to “make money” and nothing more.
Planning may be one of the most unglamorous aspects of starting a business because it’s mostly just speculation with a sprinkling of math; however, planning is intrinsically connected with success.
Consider your next vacation or road trip where you “sort of” know where you’re going. Will you leave without your phone or a map? You could, but your arrival at your destination might be hours or even days later than you expected. Starting a business without a “map” or plan is just as effective. If you know where you want to be but have no idea how to get there, things may get dicey very early on. Unfortunately, in business, it’s not as easy as turning the car around or getting a map at the local gas station but if you prepare yourself before setting out on the venture of small business ownership, then success is well within your reach.
Keep the Dream in Sight
Business plans backed up with good research present your business concept in an understandable manner to potential investors, customers, and advertisers. Take time to find a business plan template that works well with your ideas and industry. Research should include:
- Market potential: identify your potential customers
- Business competitors: size up other businesses offering similar services and products
- Access to capital: Realistically assess your money sources
- Marketing realities: Understand the type of media and scope of distribution required for marketing the new business
Use the experience of others in creating the plans as well. You may try to start with a SWOT analysis that most all business use to determine Stregths, Weaknesses, Opportunities, and Threats. If you are lucky enough to have a mentor, ask them for assistance in creating business plans. Alternatively, research how others created successful business plans and how they measure their success against them.
Not Knowing What You Are Worth
Simply put, do not sell your concept or service too cheaply. Have the courage and confidence to know what your services are worth and adjust your plan accordingly. A lot of business owners get into business to undercut the current market and sell something cheaper or better than like businesses to gain immediate exposure. While a good tactic in general, this can create a good start but can hinder longevity.
Since agents cannot control the price of the product they sell, this concept is certainly still necessary as the customer experience is part of the premium a client might pay. If your policies are more than your competitors, don’t agonize over something that is out of your control. A way to approach this is through customer service.
If you can’t beat the price, your message to clients should be about:
- Your dedication to getting the right product and coverage for their unique needs and situation
- Comparisons against policy levels that you’ve run without their asking
- A free, annual insurance review to ensure they maintain proper limits
All this must be weighed against what other carriers are charging for a similar policy. If you cannot beat or match a price, sell your worth as an adviser. Customer service goes a long way and could be your best referral tool as you begin growing your agency.
Hire the Wrong People for the Wrong Reasons
No matter how great the pressure from your grandmother, or how much fun you had together as children, do not hire your cousin (or brother, or uncle…) to work in your startup unless he or she has the skills and drive you need to get things off the ground.
The same can be said about hiring friends. It is one thing if you and a friend come up with a business concept and decide to carry it to fruition as a team. However, be aware that running a business can put serious strains on a relationship. Some friends are more able to take direction (read: do what the boss says) than others. They may try to laugh off your constructive criticism, or expect you to make special exceptions for them because they are your friend. It’s much harder to fire a close friend or family member when emotions get in the way.
Unqualified workers, no matter the personal relationship with them, are a drain on capital. At a time when every penny counts, many tasks require individuals with specific expertise and experience.
No matter what job they perform, anyone hired in a new business must be capable of doing the work it entails, so that you feel comfortable with their output and do not need to do the job for them. If you did your due diligence up front and “protect the gate” as the saying goes, then you will have fewer issues than if you just hired someone because they wanted less money than everyone else you interviewed.
Bad hires happen. You’re not going to get them all right. Never underestimate the damage caused by one bad apple: low morale, high turnover, and decreased profits. If you find that you’ve made a wrong hire, take action immediately to help the get on the same page as the rest of the organization or cut your losses and let them go. Of course you must maintain your professionalism at all times but ensuring a quick exit can help you move away from the past faster. Nothing will kill an organization faster than bad morale. It’s invasive, quick, and very detrimental to any business plan.
There is no doubt that successfully starting a small business requires some luck. However, with the right planning, a little luck will go a long way.
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