Jul 24, 2024
Topics on this page:
Any small business owner or entrepreneur will tell you: starting a business takes guts, and keeping it going takes resolve. The Bureau of Labor Statistics’ Small Business Statistics 2024 report states that there are about 33.2 million small businesses in the United States, and for most of them their number one concern is inflation. Their expenses have gone up, hourly minimum wage has increased, and they struggle to find skilled talent. This all impacts the ability to grow.
Despite challenges, few professional experiences offer the financial upside and sense of fulfillment that come with owning a business. No job fully prepares you for all the ups and downs of running your own company, and big or small, oversights and gaffes come with the territory — it’s just a matter of how big or costly your small business mistake is.
While some business mistakes are unavoidable, the common ones are easier to avoid if you recognize them in advance. These stories from real start-ups and small businesses recount the common mistakes owners made along the way. (While the names are anonymous, the stories remain true.)
Starting a small business can be a thrill ride filled with the expectation of success, prosperity, and pride. Amid the excitement, however, it’s crucial to dodge common pitfalls that could derail your entrepreneurial dreams. Here are five mistakes to steer clear of:
You wouldn’t get into your car without directions to where you’re going, and you shouldn’t start a company without writing a detailed business plan. A business plan serves as a roadmap to guide your decisions and provides clarity for your business objectives, including your target market, financial projections, and marketing strategies.
Entrepreneurs often fall into the trap of trying to wear every hat and handle every aspect of their businesses. While it’s natural to want to maintain control, it’s also easy to spread yourself too thin, which can lead to inefficiency, burnout, and stunting the growth of your business.
It’s easy to get carried away in the early stages of business development when there’s a sense of urgency to establish a presence and attract customers. However, reckless spending without careful budgeting and financial planning can quickly deplete your resources and jeopardize the sustainability of your business.
In the pursuit of building their businesses, many entrepreneurs make the mistake of disregarding competitors, assuming that their product or service is unique enough to stand out on its own. Failing to understand and monitor the competition leaves you vulnerable to being outmaneuvered in the market.
No matter how brilliant your business idea may seem, it’s crucial to ensure there’s sufficient market demand before investing significant time and resources into its development. Ignoring market feedback or launching a product or service without gauging consumer interest can result in underwhelming sales and wasted efforts.
A business doesn’t land on success in a single leap; missteps and miscalculations along the way provide valuable lessons for growth. The following real stories of mistakes from entrepreneurs and consultants serve as cautionary tales that can help prevent you from making them yourself — and perhaps find success sooner.
After running a bar and restaurant in New York City for a few years, R has plenty of regrets: joining with partners of similar skill sets, not getting everything in writing and having it reviewed by a lawyer, and trying to keep the business afloat when it was barely breaking even. The biggest one, though, was not identifying what drove the most business and pivoting toward it instead of being distracted by demanding, costly, and unproductive areas of the business.
“Some of these mistakes showed that we undervalued important clients — everyday business from the neighborhood, rather than special occasions and promotions,” R reflects. “We didn’t gather feedback and respond effectively to review our highlighted deficiencies and wasted time and resources promoting aspects of the business that were unsustainable.”
J spent hours and hours poring over administrative minutiae and paperwork before launching his financial planning firm. In part, he was procrastinating out of fear. That’s when he realized he needed help.
“I imagined I could and should get it all done myself. I’ve since learned that, when faced with barriers to real progress, I have to do something much harder than working long hours: I have to ask for help,” he shares. “Once I admitted to myself that fear was my blocker, I knew I couldn’t solve the problem with time and effort alone. I finally hired a business coach, which made all the difference.”
When C launched her events business, she had to figure out plenty, including what tools she’d need to run the company. She purchased expensive coordination software, thinking it would save her time, only to learn that her customers preferred to work with her directly instead of through the software.
“I spent way too much money in my first year of business that had zero return,” she says. “Investing in software that my customers never used cost me nearly all of my potential profits in my first season of business, plus the lost time I spent learning it and trying to set it all up. What an expensive lesson!”
For S, working with tech firms has shed light on the importance of hiring well. She explains that early-stage companies often hire a mid-level marketer to help with brand and messaging, but those hires rarely have the experience or expertise the company needs.
“I tell my clients to never hire an in-house marketing person until you’re ready to hire a CMO. Don’t bring someone on to finish baking your half-baked cake,” she advises. “Not only does it muddy the waters of brand identity/integrity, but also strategy…. It immediately instills failure into the culture of the company. This could have been prevented with a consultant or agency contract.”
W has been running her business as a leadership coach for a decade — a testament to her resilience. If she could do it over, though, she’d spend far more time establishing her brand through online marketing.
“I blogged back in 2013, but I wish I spent more time trying to get more eyes on my blog to build a community earlier on,” W shares. “I believe I could have grown my business faster, since the market wasn’t as saturated with voices as it is in today’s social media world.”
Business mistakes are bound to happen. But some will cost more than others. If C in Colorado books a wedding band for the wrong date, the couple may feel she ruined their wedding. As a financial advisor, any miscalculation J makes could have disastrous results for his clients. And for S, hiring someone without enough experience could lead to costly tech errors. All these scenarios could end up in a lawsuit. But professional liability insurance or Business Liability Insurance would protect business owners from facing the brunt of the defense costs themselves.
According to a report by the Small Business Association Office of Advocacy, legal costs for actual litigation against small and medium-sized businesses can range anywhere from $3,000 to $150,000 — and that doesn’t even include the cost of settlements or lost wages. This is where errors and omissions (E&O) insurance comes into play.
E&O helps protect you if a lawsuit is filed by a client over an alleged or actual mistake. These policies cover mistakes like bad advice, unfulfilled promises, negligence, errors, and copyright infringement, to name a few.
More important, E&O covers costs of:
A professional liability policy for a few hundred dollars a year might be the difference between a lawsuit being a detour on your path to success and derailing your dreams altogether.
Like C, the Colorado wedding planner, says, “Owning a business is a never-ending series of mistakes and learnings.” What matters is that there’s help in all sorts of forms — and protection for when you need it.
Image courtesy of istock.com/filadendron
Last updated on Jul 24, 2024.
Originally published on Apr 17, 2024.
More:
The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice. Click here to read our full disclaimer
The product descriptions provided here are only brief summaries and may be changed without notice. The full coverage terms and details, including limitations and exclusions, are contained in the insurance policy. If you have questions about coverage available under our plans, please review the policy or contact us at 833-242-3794 or support@berxi.com. “20% savings” is based on industry pricing averages.
Berxi™ is a part of Berkshire Hathaway Specialty Insurance (BHSI). Insurance products are distributed through Berkshire Hathaway Global Insurance Services, California License # 0K09397. BHSI is part of Berkshire Hathaway’s National Indemnity group of insurance companies, consisting of National Indemnity and its affiliates, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. The rating scales can be found at www.ambest.com and www.standardandpoors.com, respectively.
No warranty, guarantee, or representation, either expressed or implied, is made as to the correctness, accuracy, completeness, adequacy, or sufficiency of any representation or information. Any opinions expressed herein are subject to change without notice.
The information on this web site is not intended or implied to be a substitute for professional medical advice, diagnosis or treatment, and does not purport to establish a standard of care under any circumstances. All content, including text, graphics, images and information, contained on or available through this web site is for general information purposes only based upon the information available at the time of presentation, and does not constitute medical, legal, regulatory, compliance, financial, professional, or any other advice.
BHSI makes no representation and assumes no responsibility or liability for the accuracy of information contained on or available through this web site, and such information is subject to change without notice. You are encouraged to consider and confirm any information obtained from or through this web site with other sources, and review all information regarding any medical condition or treatment with your physician or medical care provider. NEVER DISREGARD PROFESSIONAL MEDICAL ADVICE OR DELAY SEEKING MEDICAL TREATMENT BECAUSE OF SOMETHING THAT YOU HAVE READ ON OR ACCESSED THROUGH THIS WEB SITE.
BHSI is not a medical organization, and does not recommend, endorse or make any representation about the efficacy, appropriateness or suitability of any specific tests, products, procedures, treatments, services, opinions, health care providers or other information contained on or available through this web site. BHSI IS NOT RESPONSIBLE FOR, AND EXPRESSLY DISCLAIMS ALL LIABILITY FOR, ANY ADVICE, COURSE OF TREATMENT, DIAGNOSIS OR ANY OTHER SERVICES OR PRODUCTS THAT YOU OBTAIN AFTER REVIEWING THIS WEB SITE.
Click to collapse disclamerWant Berxi articles delivered straight to your inbox? Sign up for our monthly newsletter below!
"*" indicates required fields
Ryan Craggs is a content strategist and journalist with more than a decade of marketing and editorial experience. He helps travel, finance, and tech clients craft compelling narratives that captivate audiences. For more, go to RyanCraggs.com
Ashley Bonadiccio Jul 24, 2024
Want Berxi articles delivered straight to your inbox? Sign up for our monthly newsletter below!
