According to the Government of Canada’s key business statistics for 2020, almost 98% of Canadian employers are small businesses. But while the average number of small and medium-sized enterprises created annually exceeds 96,000, more than 90,000 disappear on average each year.
On the upside, no matter what type of business you’re planning to run, there are plenty of entrepreneurs who’ve worked through start-up challenges successfully and overcome common reasons for failure.
With that in mind, here are 5 mistakes to avoid when starting your business.
Mistake #1: Skipping the business plan
Trying to build a business without a plan is as risky as trying to build a house without a blueprint. Lean business planning can be a great way to optimize your efforts internally, but you’ll need a thorough proposal when it comes to:
- Applying for a bank loan
- Pitching your idea to investors
- Conducting vital market research
Remember, even if you’re funding your business personally, you won’t get far without understanding if there’s a legitimate need for your product or service – and who you’ll be up against while trying to sell it.
Mistake #2: Not setting distinct, achievable goals
There’s no better time to learn about SMART goals than when you’re starting a business. Embraced by many successful companies, SMART goal setting is all about choosing, implementing, and monitoring business objectives that are:
- Attainable and Actionable
- Realistic and Relevant
To succeed over the long term, you need to know where you’re going, how and when you’re planning to get there, and how you’ll know when you’ve arrived. For best results, be sure to document your goals with a timely action plan that keeps you accountable, and use analytics to measure and manage your progress.
Mistake #3: Spreading yourself too thin
It’s not unusual for new entrepreneurs to get their businesses up and running all on their own. But if you spend too much time on non-revenue generating tasks like bookkeeping and administration, it can keep you from crucial, income-driven activities.
To get the additional help you need without breaking your budget, you might consider:
- Exploring cost-effective outsourcing options
- Hiring short-term freelancers or contract-based workers
- Taking on seasonal help
The fewer areas you try to cover alone, the more time and energy you’ll have to focus on sales, customer engagement, and account retention.
Mistake #4: Hiring too soon
At the opposite end of the spectrum, some business owners make the mistake of bringing on staff long before it makes sense – and before their income can comfortably support it.
Remember that typical employment costs can include:
- Time and expenditures related to hiring, onboarding, training, and funding job-related equipment
- Paying out wages, payroll deductions, benefits, holiday and sick pay
- Costs associated with hiring mishaps and employee replacement
If an hourly rate is the only expense you take into account when deciding to hire permanent help, you may be setting your business up for financial misfortune.
Mistake #5: Spending more than you’re earning
Do you know what positive cash flow is, why it’s vital to new ventures, and what the risks are in taking on too much debt or under-funding your company?
Finances may not be your forte. But if you don’t prioritize money matters, there’s a greater chance your business will fail.
According to research from QuickBooks, not only have 64% of Canadian small businesses experienced cash flow issues, 33% of those organizations have been unable to meet payment obligations.
If you need help managing or understanding your books, working with a professional accountant can be the best way to avoid business mistakes like the ones described here.