18 Mistakes to Avoid in Your Small Business in 2022
Table of Contents
- 1 18 Mistakes to Avoid in Your Small Business in 2022
- 2 Mistake – 1 : Underestimating Your Project or Service Time
- 3 Mistake – 2 : Incorrect Pricing
- 4 Mistake – 3 : Not Charging for All of Your Time and Cost
- 5 Mistake – 4 : Not Receiving Timely Payments
- 6 Mistake – 5 : No Business Systems or Procedures
- 7 Mistake – 6 : Buying Advertising “Just Because”
- 8 Mistake – 7 : Spreading Yourself Too Thin
- 9 Mistake – 8 : Not Getting Help Soon Enough
- 10 Mistake – 9 : Launching a business without a business plan.
- 11 Mistake – 10 : Having No Management Experience
- 12 Mistake – 11: Hiring assistance too soon
- 13 Mistake – 12 : Not Hiring Professional Help
- 14 Mistake – 13 : Cash Method of Accounting
- 15 Mistake – 14 : Failing to Keep Track of Your Finances
- 16 Mistake – 15 : Not doing sufficient market research.
- 17 Mistake – 16 : Not Using the Proper Marketing Techniques
- 18 Mistake – 17 : Spending an excessive amount of money too soon
- 19 Mistake – 18 : Giving up too soon
- 20 Final Thoughts
- 21 FAQs on 18 Mistakes to Avoid in Your Small Business in 2022
You may not be aware of the fact that there are mistakes you can make at various stages of your company’s growth that can have a slow and painful effect on it for months or even years if you are not on the lookout for them.
It is true that mistakes can be made, and they are not limited to start-ups.
Many working businesses, including those that you might consider to be “successful” because they’ve been in operation for more than a decade, are still producing them… and are potentially causing significant financial and/or time losses as a result of their actions.
This is an intriguing thought: Are you aware that there are mistakes you can make at various stages of your company’s development which, if you don’t watch out for them, can have a long-term negative impact on the health of your company for months or even years?
However, while some of these big and sneaky mistakes appear to be targeted at service-oriented businesses, they are applicable to almost any type of industry.
I’ve done my best to demonstrate this with the examples provided in the listings below.
Mistake – 1 : Underestimating Your Project or Service Time
The biggest mistake is underestimating project/service time. This is true for both service companies and companies that sell a product.
This is the bread and butter of any service company.
In the event that you do not accurately estimate the time it will take to perform each and every service in your repertoire, you will be burned, and there is little you can do about it other than accept the consequences and learn from your mistakes.
The most accurate way to estimate time is to complete the task yourself or watch your most capable employee complete it, and then add a small fudge factor on top of it all.
Be aware that time becomes an issue for product companies when it comes to logistics.
Mistake – 2 : Incorrect Pricing
Failure to recognize YOUR company’s inaccurately setting prices.
If you are basing your pricing decisions on the numbers used by a competitor without understanding why they do so, you are making a common mistake.
Consider the nightmare situation you will find yourself in if you take a competitor’s price, reduce it by 10%, and then begin selling it to your customers.
Imagine that your competition has a poor pricing structure and is barely making a profit, if not losing money altogether!
What happens if your costs are higher than theirs?
Competitor analysis can be helpful, but it should not serve as the foundation of a comprehensive marketing plan.
Different industries have their own set of variables when it comes to costs, and you must be aware of these in order to accurately price your project or product.
It is not only important to consider what you paid for a product you intend to sell when determining how much to charge for it when pricing products.
The amount of money you spend on labor and materials for a service is only a fraction of your hourly rate.
Employees are more expensive than just their salaries, and not every employee is included in your labor costs.
Every company has insurance to pay for. There are tons of overhead expenditures that need to be part of your price. Oh, by the way, the big one that many people forget about in their price is the quality factor.
What you include as “standard services” or “standard product features” as well as job site etiquette or in store service or warranties all need to go into your pricing.
I’ll get to more on why in the next segment.
Mistake – 3 : Not Charging for All of Your Time and Cost
This seems like a stupid statement to some, but I bet most business owners will admit that they have given away a little too much of the farm at times.
Hey, there is nothing wrong with giving a little extra here and there to show you care.
But either way, that’s not what I’m talking about here. What concerns me are those that put a lot of quality into their work or products or stores and do not cover the cost for it.
As an example, say you run a service company and your competitors don’t do a certain standard service that you do.
You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront.
Stores undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it.
These things cost you money, and when your competitors don’t do them, it costs them less money.
Put out better service and then under price them, and your competition just has to wait a little bit for you to fall on your face so they can swoop back in.
As a business owner, you need to believe that you are providing your clients with worthwhile wares that deserve to be paid for.
If you are given the opportunity to explain why your prices are higher, you should take advantage of the situation.
A person who is completely price shopping is someone who does not like the fact that you include items for which others charge a premium later or that you treat them better than they would otherwise.
You don’t want them as regular customers in the first place, right? Trust me on this.
Mistake – 4 : Not Receiving Timely Payments
Not Getting Paid Quick Enough-Yes, it’s that old cash flow problem again.
As long as you are earning enough money to cover your living expenses, you can solve, prevent, or at the very least mitigate the severity of this problem.
Here’s how it works:
First and foremost, bill customers as soon as possible. It is very common for a small business to lack the procedures and systems necessary to generate invoices and get them out the door in a timely manner (see the next segment for more).
Again, this would appear to be unlikely given the fact that we are performing the work in order to be compensated.
The people in charge of getting this information to the billing department, on the other hand, may be overworked and unable to complete the task or may lack the necessary organizational skills to ensure that the information is delivered correctly.
The second step in slowing down or stopping a regular cash flow crunch is to make payment deals with customers as quickly as possible, while making payment deals with vendors and employees as slowly as is possible.
If there is any way to avoid paying employees more than twice a month, you should take advantage of the opportunity.
This is something that contractors always have a problem with. Assuming you must pay on a weekly basis, inform your employees before they are hired that the first week will be held back, thereby effectively purchasing you a week.
I promise you that it will be beneficial.
Credit is discussed in detail in the third section. If your company is eligible for a credit card, apply for one.
This enables you to purchase certain important items (that you can afford) that may become necessary during a period of cash flow constraint.
Better yet, especially if you are forced to deal with customers who have not paid their invoices within 45 days, make every effort to obtain a company line of credit.
If you plan on selling to the government or providing commercial service work, this is a must-have document. These clients are frequently subjected to 60-90-day waiting periods.
Mistake – 5 : No Business Systems or Procedures
This is a common occurrence. Many people are discouraged from starting their own business because of an excessive number of procedures (commonly referred to as “red tape”).
Unfortunately, not having any procedures or systems in place at all is not an option in this situation.
Whatever the industry, business owners must find a happy medium or else chaos and the unknown will envelop the world.
Among the many basic examples of where procedures or systems are required are billing and collections, payroll, human resources (interviewing, hiring, vacations, benefits and job responsibilities, among other things), manufacturing and equipment operation and maintenance, inventory, sales calls and visits, and logistics, to name a few.
Even a one-person show requires the establishment of administrative procedures.
This will make it easier for you to hire temp employees and subcontractors, as well as maintain control over the work they perform for you.
With no system or procedure in place to guide you through everyday tasks, you will be held responsible for the creation of numerous major headaches as your company expands and becomes more successful.
I can’t emphasize enough how important this is when it comes to onboarding new employees. You have probably heard me say this before, but I am a strong believer in the importance of having an employee handbook, even if it is only for one employee.
When it comes to causing business owners problems, it’s amazing how much trouble people can get themselves into simply by allowing you to pay them.
Mistake – 6 : Buying Advertising “Just Because”
Investing in Advertising Resources – Advertise-Just to let people know you I would almost prefer that my clients do not advertise rather than that they spend money without considering the outcome of the campaign.
There is no point in launching a marketing campaign unless you put measures in place that will allow you to assess how well the campaign is performing.
In addition, many people make the mistake of not tracking their previously successful marketing campaigns, which is another wasteful aspect of marketing.
I’m baffled as to why some people believe that just because a $400-per-month advertisement performed admirably during a single busy season, it will automatically perform admirably every year thereafter.
Mistake – 7 : Spreading Yourself Too Thin
This is a classic mistake made by every entrepreneur: spreading one’s wings too far too quickly.
The key is to recognize when you have reached the point of “wearing too many hats” and to seek assistance as soon as possible.
The solution to this problem is to be aware of your own personal strengths and to be able to recognize when you are not performing the tasks that require these abilities.
If you are the most successful salesperson in the company, you cannot afford to become involved in day-to-day operations.
Otherwise, sales will suffer, and you will be left with no operations to worry about in the long run.
You can use the following question to determine whether or not you are overextending yourself: Did you really go into business for yourself to work 80+ hours a week?
Mistake – 8 : Not Getting Help Soon Enough
Establish goals to determine when it is appropriate to hire people to take over in areas where you lack knowledge.
A company can be destroyed if it does not receive assistance or if it waits too long. Many business owners do so because they are skilled in either the technical or sales aspects of their industry.
If you know how to make a widget in the most efficient manner, your strength lies in production, and it is here that your time should be invested.
Initiate contact with an outside company or consultant to handle sales and marketing, and then bring in an employee from within when you can afford to hire someone full time.
Don’t pretend to be someone or something that you are not in your company. It will only serve to impede your progress.
Legal issues, accounting/bookkeeping issues, and day-to-day operations issues are the three major issues that people like to take on themselves but are usually the ones that they are least knowledgeable about.
The likelihood is that these three things are your weakest link, so if you don’t have a partner who is knowledgeable in these areas, be prepared to seek assistance as soon as possible. Preferably, you should do this before you start your business.
Although looking for these issues at any time is a good idea, the end of a year or season is a particularly good time to check to make sure you are not making any of the mistakes mentioned above.
Make the time to address these issues, or find the time to do so. If you are unable to reverse the problems on your own, seek professional assistance.
Obtain professional assistance if you truly lack the time to either determine whether or not you have these issues, or if you are aware of them but are unable to separate yourself long enough to properly address them.
Here is a list of some of the other mistakes that entrepreneurs make when they first start out. In this article, we’ll go over ten of the most common mistakes that new entrepreneurs make when starting their companies.
Despite the fact that mistakes can be our greatest teachers, they can also be time-consuming and expensive.
As a result, I’d like to share with you my hard-earned lessons learned as well as the wisdom I gained from my own mistakes in business judgment.
Mistake – 9 : Launching a business without a business plan.
In order to ensure the success of your new venture, you must develop a written business plan. To get started, it can be as simple as creating a single page.
Writing it will force you to think about how you intend to bring your business to life and make it profitable at the same time.
Compel yourself to answer questions like
- Who will my customers be?
- Why will they buy from me?
- How much will I charge for my products and services?
- How will I spread the word about my new business? and so on.
Be realistic when it comes to the costs of running your company.
Your business plan will serve as a living, evolving, and constantly improving guide for you as you pursue your goals.
Mistake – 10 : Having No Management Experience
The founder of a small business is directly responsible for all aspects of management, including finance, marketing, and sales, as well as dealing with subcontractors and cleaning the bathroom (among other things).
However, if you are starting your business because you are exceptional at your particular skill or service and wish to devote all of your time and energy to doing so, a family member or business partner may be able to handle the majority of the company’s management responsibilities.
This individual must be on the same page as you regarding your business vision and goals.
Mistake – 11: Hiring assistance too soon
Employees should not be hired unless they are absolutely necessary.
The cost of hiring additional employees can quickly deplete the financial resources of a small business.
Hire only those who are dedicated and trustworthy when the opportunity presents itself. Only hire people who are truly necessary to your company and who will have a positive impact on it.
We make every effort to use subcontractors as much as possible in our home-based small business venture.
Mistake – 12 : Not Hiring Professional Help
Do not cut corners when it comes to hiring professional advisers such as an accountant and an attorney.
Interview several advisers until you find one with whom you feel comfortable conversing. Do they have a grasp of what you’re attempting to accomplish?
Does it appear that they are eager to share their experiences and knowledge with you? These professionals can save you a lot of time and money by handling your paperwork for you.
Mistake – 13 : Cash Method of Accounting
The “cash method” of accounting requires you to record business income as soon as it is received into your bank account.
When an expense is paid out of your bank account, it is recorded as an expense. The majority of us prefer to use cash as a method of managing our personal finances because it is much simpler and requires less time.
This is also the most appropriate method for small and home-based businesses to use.
In accordance with the “accrual method,” you would record business income at the time it is earned, regardless of when you might receive payment for the product or service you sold.
And you record an expense as soon as it is incurred, regardless of when you will have the opportunity to write a check to pay for it.
For a small and home-based business, keeping up with this accrual method is far too difficult to manage.
Mistake – 14 : Failing to Keep Track of Your Finances
Every month, you must keep track of your income and expenses in order to understand where your money is going.
You can do this yourself using inexpensive accounting software, or you can simply download your monthly bank and credit card statements from your financial institutions.
Cash flow is critical to the survival of a small, newly established business.
Mistake – 15 : Not doing sufficient market research.
This is a very common problem for businesses that are just getting started. Market research can take many months and a great deal of research to complete properly.
You must be aware of your competitors as well as the people who will be your customers. All aspects of your industry must be understood completely – both inside and out.
Find out everything you can about your particular type of business by reading as many books and articles as you can. Consult with others who work in the same industry.
Mistake – 16 : Not Using the Proper Marketing Techniques
Every company must have an online presence in order to succeed. It makes no difference what kind of business you are in; you must have an online presence.
It is now possible to conduct extensive and sophisticated marketing without incurring any expenses – for free.
You must have an online presence, whether it is a simple website, Facebook, LinkedIn, Tumblr, or an online telephone directory listing.
Mistake – 17 : Spending an excessive amount of money too soon
You should not begin by spending thousands of dollars on business cards and letterheads if you are working with a limited financial budget.
You do not need to spend thousands of dollars on hiring a company to build your website when you can easily and quickly create a fantastic website on your own!
You should continue to use your older computer until you have the necessary cash flow and the actual need for a new computer. Consult with your accountant before making any large purchases, such as purchasing a new truck or machine.
Mistake – 18 : Giving up too soon
Being an entrepreneur requires a lot of stamina, drive, and determination, to name a few qualities.
A crucial part of being an entrepreneur is not giving up on your dream because of a few bumps in the road. If you want to achieve any level of success in life, you must first develop the intestinal fortitude to endure difficult situations.
Remember, don’t believe anyone who tells you that starting and running a business is simple or straightforward. It also requires dedication, perseverance, faith, and a compelling vision.
Please feel free to completely disregard this advice, or to listen to it and keep it in the back of your mind as you begin your new business venture.
However, don’t let the fear of making mistakes, whether they are costly or not, deter you from starting your new business venture.
Making mistakes and understanding why you made them, as well as learning how to fix them or avoid making them in the future, will prove to be your most valuable teacher throughout your life.
In addition, it would be beneficial to establish a working relationship with an experienced accountant and lawyer who you can turn to for assistance.
FAQs on 18 Mistakes to Avoid in Your Small Business in 2022
What to avoid in doing a business?
The following mistakes to avoid when starting a new business: Making a business plan was something that was overlooked. Inadequate financial planning and resources are available. Failure to monitor and adjust progress has resulted in Purchasing assets with your cash flow is a good idea. Keeping outside assistance to a minimum, Setting the wrong price, for example Ignoring technological advances, Neglecting the importance of online marketing
What are some common mistakes made when starting a new business?
The most common mistakes made by first-time business owners include drinking their own cool-aid, not keeping an eye on the bank balance, failing to protect intellectual property, and failing to plan ahead of time. Micromanaging for an excessive amount of time, making poor hiring decisions, not putting enough emphasis on sales, and so on.
What a small business should not do?
Things not to do when starting a business include the following: You shouldn’t spend too much time on your business plan, and you shouldn’t be afraid to pivot. You shouldn’t be rushed to be the first to market. You shouldn’t ignore paperwork. You shouldn’t ask everyone you know for funding.
What should a business owner not do?
The Most Common Mistakes Made by New Business Owners make like Don’t try to be better than you are, Don’t blame others, Don’t ignore the numbers, Don’t take your employees for granted, Don’t mistreat your suppliers, Don’t get mistreated by your customers, Don’t ignore your customers, Don’t forget to pay your taxes, and so forth.