Today is April Fool’s Day. Unfortunately, I’ve seen many small business owners make foolish mistakes that come back to haunt them as they try to grow their companies. Sometimes the errors that occur during the startup phase of a company’s life cycle will haunt it for a long time.
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Here are some common foolish mistakes and ways to avoid them.
Not writing a business plan
Having a well-written, professional looking business plan is extremely important for anyone launching a company. It provides a roadmap of where you want to go and how to get there. The plan should have a succinct Executive Summary that outlines the company’s key differentiator, its advantages over competitors, target market, geographic area, management team experience, and industry conditions. The business plan should be a living document that is continually updated. It is foolish to start a business without one.
Being short on capital
If you don't have enough money to keep running your company, it will not survive. First, be sure to have enough funding to get the operation off the ground. You don’t want to go back to the bank for a second loan before you even open your doors. This would send a warning signal to loan officers that either the business isn’t viable or that you don’t know how to plan. Neither reflects well on the business owner. There are monthly expenses you have to budget for, including: rent, phone and Internet fees, staff salaries, etc. Open a business line of credit in case you encounter lean months and need an infusion of funding. It is foolish to try to operate a business if you are constantly short on cash.
Failing to upgrade technology
It is foolish to try to run a company without having some type of Internet presence. You don’t need to have a web site with lots of bells and whistles, but it is a necessary to have readily available information about your company online. A web site brings a level of credibility that is necessary in the 21st century. No one is using the Yellow Pages anymore. When potential customers seek information about a restaurant, roofing company, landscaper or attorney, they will look for it on the web. If your company is not where they are looking, people will never find you.
In the financial industry, there are still many banks and other lenders who do not allow online applications for small business loans. These institutions are missing out on millions of dollars in deals annually. My company’s data has shown over and over that most entrepreneurs are busy running their companies during traditional business hours and tend to apply for financing during night hours or on weekends. Meanwhile, most banks offer little assistance in the evenings or on Saturdays and Sundays.
Filing taxes after the April 15 deadline without an extension
Don’t mess with the IRS. Eventually the agency will catch up with you, and it is foolish to incur late penalties or audits because you do not file on time. The IRS can even be helpful, believe it or not. During the government shutdown last year, loan processing came to a halt when banks could not verify income levels.
Taking the marketing of your business lightly
To many entrepreneurs, the marketing of their company is the fun part of opening a business. However, some business owners may be good at their craft – practicing law or medicine, painting houses or preparing tax returns, for instance – but might not be well versed in the promotional aspect of it. It is foolish to think you can open and grow a business without being involved in marketing. If you cannot write a press release, hire a firm that knows how to do it. Not adept in social media? See if anyone on your staff is good at it or find a consultant who can maximize your web presence. Be sure to set aside a sufficient amount of dollars for marketing purposes. You don’t have to have a Super Bowl-sized advertising budget in order to get the word out about your firm.
Setting unrealistic expectations
Will your new coffee shop put Starbucks out of business? Probably not. It is foolish to believe your company can be the market leader overnight. There is only so much that advertising and PR can do. Word of mouth takes time to build. People may need to hear about your product or service a few times before they will consider taking advantage of your offer. The old saying, Rome wasn’t built in a day, certainly applies. Very few companies experience overnight success, and many that do are fads. Plan for sustained growth by providing good value.
Under-appreciating your customers
Never take your customers for granted. If you treat them well, people will keep coming back. When you fail them in some way, quickly try to make amends. While the nasty comments written on Yelp or Facebook might be unfair, remember that usually where there is smoke, there is fire. For instance, when patrons express that service is too slow, look for ways to speed things up. It is foolish to ignore their feedback. Once you have figured out a way to address the issue at hand, communicate it promptly. Engage dissatisfied customers in a dialog. They will appreciate it, and perhaps will take to social media to express their satisfaction that you listened to them and tried to make good.
Rohit Arora is co-founder and CEO of Biz2Credit, an online resource that connects 1.6 million small business owners with 1,200+ lenders, credit rating agencies and service providers such as CPAs and attorneys via its Internet platform. Since 2007, Biz2Credit has secured more than $1 billion in funding for small businesses across the U.S. Follow Rohit on Twitter @biz2credit.