3 Common Pitfalls for Small Business Start-ups
// October 6th, 2009 // 2 Comments » // Business
Small business owners are prompted by love of craft and the desire to do things their way. This is not to be confused with an Entrepreneur, which is very very different. Here are a few pitfalls that SBOs run into in their first 3 to 5 years:1. Underpayment/Devaluation/Underemployment
Many small businesses fail due to underpayment. The mentality of “charging less than the competitor” is a great idea if you’re NOT a small business. Small business owners typically under-charge because they themselves, devalue what they are offering. Excuse qualifiers such as “I’m just getting started and I’m not sure what I’m doing, so I’ll charge less until I figure it out,” is a typical example of the type of “self talk” SBOs feed themselves. This leads to underemployment where the SBO is the lowest paid person on staff (if there is any staff), no benefits, no vacation, etc. At the end of the day, what used to be a great idea slowly turns into a nightmare of scrapping by and working long hours just to pay the bills. Most of these types of SBOs don’t really go out of business, they simply quite due to exhaustion.
2. Lack of Differentiation
This is the lifeblood of small business. If you’re not differentiated, then every day that you’re still in business is a gift from God. It is commonly known that, in business economics, companies operate on 2 of 3 factors; quality, quantity, and price. Wal-Mart, for example, focuses on quantity and price by profiting pennies on the dollar x billions of sales. Unfortunately, Wal-Mart has a bad reputation for putting small businesses under, which in my opinion is only partially true. Small businesses need to respond to large companies like Wal-Mart by NOT competing in the same competitive fields. But rather, focus on quality and pricing, abandoning quantity altogether. Differentiate, differentiate, differentiate. You’re not Wal-Mart, so don’t try to compete with them. What makes you different enough, that someone would want to pay you for that difference?
Take this with a grain of salt, as the dynamics are too lengthy to encapsulate in this short blog.
3. Bad Business
The Thomas G. Jones Small Business Diamond states, “Bad business is always available”. Good clients pay on time, value your services, support your company and are generally ethical. If you have a client like that, you’ll do whatever you have to in order to retain them! Many small business start-ups don’t have the luxury of having many of these types of clients in their portfolio, and, in order to pay the bills, must take immediately available business to keep cash flow going. This type of business is usually… bad business. Client’s that don’t pay on time, give you a million change orders, argue about cost, micromanage, and are just plain rude. Too many bad clients disarm, deflate and discourage the passions of the small business owner. Only hang onto bad business as long as you have to.
