Staring up a business requires a lot of hard work which most entrepreneurs often underestimate and end up failing. There are several things starters overlook that end up haunting them and leading to business failure. At times, the business might kick off very well, but distractions are inevitable, and mostly they come when a business starts shaping up. There are mistakes that once you make them, their effects are irreversible, or they will take you a lot of time to reverse them. Let us look at some mistakes that business starters and freelancer make and end up failing.
1. Lack of focus and identity
Starting a business requires commitment and hard work. Unlike formal employment, where you still earn your salary at the end of the month regardless of your output. Your output in business determines your income. If you take weekends and off days when your business is still an infant, then you are heading to failure. You must work extra hours daily and take no off days during business start-up.
2. Underestimating financial requirements
Business starters underestimate the start-up capital required for the enterprise to run before it breaks even. Failure to determine the start-up expenses results from lack of experience or ignorance. You start a business without comparing the initial capital requirements of similar enterprises. Lack of enough financial needs when starting a business leads to either taking loans at higher interest rates to cater for expenses or retarding of the business.
3. Failure to differentiate sales and profit
The other common mistake with business starters is failing to distinguish total revenue and profit. Profit is the money left after settling all the expenses. A business can generate a lot of income in sales but make huge losses due to high costs. Business starters make a mistake of spending the revenue generated by the business for their expenses without first determining the actual profit or loss. To avoid this mistake, always ensure you calculate the profit. There are two ways to increase business profit. One way to increase profit is by minimizing your expenses, and the other one is increasing your sales.
4. Improper use of money
Beginner entrepreneurs make a mistake of buying unnecessary items and hiring more than enough staff. The overhead costs exceed the income that the business generates. The workforce requirements of the business should correspond with the job available. Untrained staff can result to invoicing mistakes to customers adding to losses.
5. Poor location of the business
When siting a business, you should know your target customers. Business starters make a grave mistake while choosing the location of their businesses. Siting a business in a hidden area or inaccessible place is a bad mistake. Wrong targeting of customers, for example, starting a car spare parts shop where there are no roads or a pork butchery in a Muslim dominated city.
6. Thinking too small
Another mistake is targeting a small market to avoid competition. The lower the target customers, the less the revenue a business can generate. A business starter with a low vision will sit comfortably with a small increase in profit and forget to work harder. A business starter needs to aim higher every day and prepare for fierce competition from other entrepreneurs.
If you are aspiring to be an entrepreneur, you need to learn these and other mistakes that starters make because every error lead to loss of money and time which are scarce. Do not start any business without the right information at hand.