- Amid COVID-19, more people are choosing to start small businesses. Entrepreneurs are filing for employer identification numbers, and Google search trends are reflecting an uptick in small business terms.
- There are common pitfalls associated with entrepreneurship, such as starting a business to make money and working without breaks, entrepreneurs must be mindful not to make with their startup.
- These pitfalls may make it more difficult to start a business and keep it running. Luckily, there are solutions and strategies that can keep entrepreneurs from making these mistakes.
Across the United States, many individuals are using this unprecedented time to start a small business. According to The Kauffman Foundation's Trends in Entrepreneurship Series, the term new business opportunities has been trending significantly on Google searches in 2020. Applications to file for tax IDs, commonly referred to as employer identification numbers (EINs), are also experiencing a 1% uptick in filings with the IRS.
Those new to entrepreneurship have access to plenty of resources, ranging from blog posts to third-party filing services, that can help them figure out how to write a business plan, incorporate the business, and find financial assistance. This allows startups to steadily stay on the road to success. It also helps them avoid making common entrepreneurship pitfalls, the most common of which are listed below.
- Lack of clear direction for the business
- Addressing the wrong audience
- Spending too much – or too little – time focusing on your competition
- Going into business solely to make money
- Working nonstop without establishing a proper work-life balance
If you do find your startup is moving toward an accidental pitfall, what can you do to prevent it from happening? Let's take a look at what small business owners can do to avoid these common pitfalls of entrepreneurship.
1. Lack of clear direction for the business
Take a moment to ask yourself where you'd like your startup to be in the next year. How about two years out, or five years out? Do you know what kinds of goals you'd like to set and reach? If you're struggling to answer this question or have no documents to refer to that can help answer it, you may not have a clear direction for your startup.
It's important to recognize early on that every small business needs a strategy. What comes next? What's the plan? Drafting a business plan can serve as a great roadmap for your business. This document allows you to outline goals and milestones you'd like to reach with your startup. With the help of a business plan, you may detail the steps it takes to reach a specific goal and establish a loose timeline for when you ideally plan to meet these goals.
The landscape for small business is constantly changing, so don't worry if it takes a little longer than planned to reach the goals you set for your business. Remember that you may always return to your business plan and make edits. You may even pivot into a different direction that is a better fit for the startup's needs! The key is to create a plan that clearly outlines the direction the business is going in and your plan for getting it where it needs to be.
2. Addressing the wrong audience
One common pitfall of entrepreneurship is not understanding who makes up your audience. Some businesses try to be everything to everyone, even if their products or offerings are not particularly universal. Others spend more time addressing the wrong audience because they are not sure who makes up their target audience.
There are a few ways you can figure out who makes up your specific audience. One of the best methods is to create a customer persona. Gather data on your customer through a variety of avenues, including focus groups and surveys, to better understand their needs. Watch for trends in this data as you continue to gather it on more and more customers. Then, you may create a persona. This is a fictitious figure that occupies a certain demographic. Personas have a name, a short narrative that details their profession, age, income bracket, and educational background, and specific problems that your startup hopes to solve.
Once you have created a persona and shared it with your team, you will be better equipped to attract the proper audience, capture, and retain them for your business.
3. Spending too much – or too little – time focusing on your competition
How much time do you spend thinking about the competition? Do you find it's teetering the brink of too much analysis on their Instagram account or reading their newsletters? Or, are you a bit in the dark about what they're doing because you're focusing on your business? Is it better to know too much or too little when it comes to your startup's competitors?
The answer is to create a balance that is somewhere in between.
You don't want to spend all of your time watching your competitors and copying their every move. At the same time, you don't want to spend months launching a service only to discover a similar one by a competing company that has long existed. Return back to your business plan to the section on industry analysis. Review who makes up your direct and indirect competition.
Write down your observations on what they are doing and what your business can do that positions customers to reach out to your offerings instead of theirs.
4. Starting a business just to make money
We're in a challenging time. Earning revenue with your small business remains critically important for the survival of the company – and its team. However, do not seize the opportunity to start a business simply to make a lot of money. If you treat your small business as a means to get rich quick … the odds are good this may not happen.
Why? Now more than ever, customers want to shop with businesses that align with their values. These businesses are transparent in their messaging and authentic in the way they engage with customers. It's not difficult to separate companies that are passionate about their products and services, and meeting the needs of their customer base, from those that just have dollar signs on the brain. Try to avoid the pitfall of starting a small business to make a quick buck. Instead, focus on the ways your business is able to help others and can provide solutions to problems.
5. No proper work-life balance
In the early days of a startup, it's not uncommon for an entrepreneur to wear many hats. They may be taking on the role of several occupations all at once – bookkeeper, social media management and customer service. A great deal of time, effort, and energy go into the business to ensure it can maintain operations and be successful.
That being said, it's important that you do not spend so much time working that you accidentally burn out. Do not fall into the pitfall that being an entrepreneur means you need to sacrifice everything else in your life.
Set aside some time each week – and on a daily basis – that allows you to rest and recharge own internal batteries. Spend time with loved ones, call close friends or mentors and talk on the phone, exercise to boost your mood, and engage in other healthy activities, like cooking and meditation, that restore your body and mind.
Creating a proper work-life balance keeps you running smoothly, which in turn allows the business to run smoothly.