Startups can’t afford to make the same mistakes that large corporations make. Unless you have unlimited cash flow, it’s difficult to recover from most mistakes. Entrepreneurs are good at picking themselves up by their bootstraps and creating profitable businesses with little capital.
But new businesses also come with a high risk of failure.
Statistics show that 50% of businesses fail within the first five years of operating. Sometimes, a bad business model is to blame, or it’s a silly mistake, such as failing to get insurance, that causes a business to suffer unexpected losses.
Mistakes that you can avoid with proper preparation include:
1. Refining Your Product or Service Based on Feedback
Consumers want to know that you care about your products or services. There is no such thing as a “perfect” product. You might offer the industry’s best product, but if you’re not listening to your customers, you might be bound for failure.
Ask customers for their feedback.
Even the best product in the industry doesn’t mean that there is a demand for your product. You want to be certain of two things:
- There’s a demand for your product or service.
- You’re always willing to adapt and change.
You should use pilot projects to judge how the market embraces your offering. Ask for feedback, and if the product just isn’t viable, at least you didn’t invest heavily in it.
2. Failing to Obtain the Proper Insurance
Your business needs proper insurance. If you’re running a brick-and-mortar operation, you need to have general liability insurance. If you have employees, you may also need workers’ compensation insurance.
These are just a few of the insurance policies that you’ll need for your business.
Every business is different, so you may need other types of insurance, too. Imagine this scenario for a minute and what it would do to your business:
- A customer walks into your store and is browsing your goods.
- The customer takes a step and that loose tile no one told you about slips forward.
- The customer slips, falls and breaks their back.
Guess what? You have a hefty lawsuit on your hands that you’re liable for without insurance. Can a small business, just starting to become profitable, afford this hefty expense?
There are 8 million emergency room visits attributed to slip and falls every year.
You’ll be liable for:
- Medical bills
- Pain and suffering
- Lost wages
- Lost earning capacity
3. Hiring Employees Too Quickly
Freelancers and contractors alleviate the need to hire employees too quickly. These professionals can help you tackle larger projects without the need to have a part-time or full-time employee. But it’s a fine line of when to hire and when not to hire.
You should hire people when they:
- Align with your company’s vision
- Provide a benefit to your company
- Allow you to take on more work
An important aspect of hiring is making sure that employees also share your vision for the company. If the employees you hire need an immense amount of training, this can lead to a lot of turnover and wasted time.
If you hire people too quickly, you’ll also have to deal with the painstaking process of firing employees and trying to lure in top-level employees on a limited budget.