Scary things to avoid when starting a business

  • October 25, 2020

Starting a business can be frightening. There are plenty of horror stories about new companies that opened their doors one season, only to close the next. But as the air becomes colder and jack-o’-lanterns light up the night, your new venture can have a sweet ending when you avoid these hair-raising mistakes.

1. Charging chilling rates

Setting prices below competitors to gain a piece of market share will eventually backfire. Tight profit margins can put you in the red quickly if production or operational costs increase. If you’ve already undervalued your products or services, drastically increasing your prices later won’t make your clients happy.

You can fix the situation by replacing lower-paying clients with those willing to pay a fair rate. Pricing just above the industry average can leave more room for negotiations with new clients.

2. Believing every zombie is a potential customer

The more defined your customer, the greater your ability to address their specific needs. Suppose you plan to offer a cloth diaper disposal service to parents. Defining your ideal customers as “parents” isn’t helpful. But narrowing your focus to include “parents of babies age 0 – 3 years” might help.

Continue to identify your potential clients by understanding where “parents of babies age 0 – 3 years” who also use cloth diapers meet, online and offline. Learning more about your ideal customer helps to uncover the best ways to reach them. Bottom line – perform basic market research before opening your business.

3. Creating a phantom business budget

Just like a household budget keeps you on track in reaching your personal financial goals, a realistic business budget is necessary to achieve success. Without a way to track income and expenses, you’ll likely overspend, reinvest too little, and be out of business within a short time frame.

You can purchase business accounting software or use free budgeting tools to get started.

4. Setting foggy goals

Business growth doesn’t happen by accident. If your business can’t adapt to changes in the market, shifts in the economy, or advances in technology, growth may be unnecessarily challenging. Set business goals that are specific, realistic, and measurable. Include both short and long-term goals to stay motivated every step of the way.

5. Hocus pocus planning

You’re likely in a rush to sell your product or service to your first customer. But, slow down long enough to write a business plan. It’s this very plan that can speed up the time it takes to make your first sale.

Your business plan should include basic information such as:

  • Business idea summary
  • Description of the problem your product or service will solve
  • Ideal customer and how to reach them
  • How your product or service differs from the competition
  • Source of start-up funds
  • Management and staff positions
  • A written plan can’t guarantee success, but it can go a long way toward reducing the odds of failure. As your business grows and evolves, revisit and revise your plan.

Complete and attach financial forms to the plan. They can help guide money decisions to ensure they’re tracking with your overall business goals. Both small and large businesses use monthly budgets, balance sheets, and profit and loss statements for this purpose.

Apply these tips when starting your new business to make sure it’s filled with spook-tacular treats all year-round!

Live Well, Bank Well