According to the U.S. Bureau of Labor Statistics, 2 in 10 businesses fail in their first year. While that statistic isn’t encouraging, entrepreneurs can find success with their business if they avoid common startup mistakes. Here are six common mistakes new business owners make and how to avoid them in your company.
Not doing enough market research
Thorough market research is the best way to know who your potential customers are, what they need and want, and how to best sell to them. While this may seem like a critical step when starting a business, not all startup teams spend enough time understanding their target market before launching, said Ryan Carrigan, CEO and founder of moveBuddha.
“Many new business owners underestimate how competitive their market can be and don’t do the proper research,” Carrigan said. “Therefore, their sales suffer and they often close their doors within the first year.”
(Read more: Starting a small business? How to find your first clients)
Investing in too many software products
There are countless business software options to help you run your daily operations more efficiently, but startups shouldn’t invest a lot of funds into a complex technology stack right from the start.
According to Aaron Goldsmid, head of product at Deel, small businesses would do well to optimize their technologies to save money, especially in the beginning.
“The average company uses 16 HR and payroll tools, which is a big burden. Consolidating your technology stack into one platform, or as few as possible, will go a long way in the cost savings and customer experience departments.” employees,” Goldsmid told CO –.
Industries evolve rapidly and business needs change almost daily, so you must be willing to realign your goals to keep up with the fast-paced business world.
Sofía Pérez, owner and content director of Character Counter
Ignoring cybersecurity
Too many startups believe they have to choose between investing in their company or investing in cybersecurity, said Jason Manar, a former FBI agent and chief information security officer at Kaseya..
When companies ignore cybersecurity in favor of other upfront expenses, they open themselves up to costly cyberattacks that could shut them down before they have a chance to get off the ground. The average cost of a data breach for US companies was almost $9.5 million in 2023.
Manar recommends establishing a solid cybersecurity strategy that includes educating your team on best practices and security awareness.
“Always prepare for the worst. It is imperative for a startup to develop an incident response plan and also understand where its data is and prioritize data protection,” Manar said.
Failure to adapt to industry changes
Sofía Pérez, owner and content director at Character Counter, said startups, especially those in the tech space, often fail to adapt to changes in their market or industry. This mistake is particularly common when the changes do not align with the business owner’s vision.
“Industries evolve rapidly and business needs change almost daily, so you must be willing to realign your goals to keep up with the fast-paced business world,” Perez said.
(Read more: How startups contribute to innovation in emerging industries)
Operating without a business plan
Whether a one-page overview or a full document, a formal business plan is a key component to startup success. While your content isn’t set in stone, it can be a useful tool to help guide your business to align with your vision and keep you on track as you reach certain key milestones.
Without a business plan, it is much more difficult to identify the right next steps to take to achieve your short and long-term goals. A business plan is also required if you are seeking financing, such as capital assistance from investors and grant programs. Therefore, you will need a written record of your company’s market, finances, objectives, and the specifics of your products or services if you want to apply for financing.
Failure to keep organized financial records
Accurate financial records are needed to track your profits and growth. Startups without a proper accounting process run the risk of having a poor understanding of their cash flow, making unwise financial decisions, and encountering tax compliance issues.
If you are not familiar with the basics of accounting, it is best to outsource this function to an experienced professional. If you can’t afford an accountant when you’re just starting out, consider investing in accounting software designed to streamline everything from synchronizing transactions and reconciling your books to generating invoices and receiving payments.
CO—aims to bring you inspiration from leading and respected experts. However, before making any business decisions, you should consult a professional who can advise you based on your individual situation.
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