Becoming an entrepreneur is an exciting undertaking, but it can be difficult to get your new company off the ground — even with a great business idea. About 18% of startups won’t make it through their first year, and only 50% will last beyond five, according to Bureau of Labor Statistics data.
While you can’t anticipate and prepare for every potential hurdle your business may face, there are strategies to help set your business up for long-term success. Here, business owners and industry experts share some of the most common mistakes startups make and tips to avoid them.
1. Starting without a detailed business plan
When you launch a new business, one of the first mistakes you can make is getting started without a well-researched, detailed business plan.
“At the start, I didn’t realize exactly what running a business entailed,” said Haley Slade, CEO of Slade Copy House, in an email. “Not having a solid business plan and ‘shooting from the hip’” — a mistake Slade often sees other new business owners make as well — meant later having to “backtrack to do things properly,” she said.
A comprehensive business plan should outline your business goals, products and services, market analysis, distribution strategy and financial projections. Not only will it guide you through each step of starting, managing and growing your business, but it will also be a requirement of any potential lenders, investors or partners you hope to work with.
“Without a clear plan, it’s difficult to make informed decisions and measure progress,” Slade said.
Plus: 15 great US cities and towns to launch your business
2. Overlooking your finances
As a new entrepreneur with enthusiasm for your product or service, it can be easy to dive right into production or sales and look at an essential piece of running a business — your finances.
To help business owners set themselves up for success, one of the first things to think about is “establishing what we call great financial hygiene,” says Hannah Shr, senior program manager at ICA Fund, a small-business accelerator based in California.
This includes the basics, Shr says, like making sure you’ve chosen the legal structure that best supports your business model. You should also have a way to keep accurate financial records, such as using a point-of-sale system or accounting software.
Beyond setting up this framework, the next step is to regularly look at your finances and, most importantly, “interpret what your finances are telling you and use that to make decisions about the choices you make in your business,” says Shr.
Related: ‘I thought my business was done’: How the SVB collapse impacted one small business CEO and how he will manage cash in the future
3. Not defining your target market
Another common mistake startups make is not performing adequate market research or defining their target customer base. Through market research, you should be able to pressure-test your business idea and ensure the market needs what you’re offering.
“Figure out who your audience is [and] what is the problem you’re solving for them specifically,” says Dave Charest, director of small-business success at Constant Contact, a digital marketing company.
“If you’re trying to be something for everyone, you end up being for no one,” he says.
By determining your target market, you can lay a solid foundation for your business and gather the information you need to develop a sales and marketing plan. Ideally, your market analysis will be part of your business plan preparation — that way, you’re using this research to inform your decisions from the get-go.
4. Trying to do it alone
When you start a business, especially for the first time, you’ll likely want to be involved in every step, every detail, every decision. It may be difficult to delegate tasks or ask for help — even when you’re stretched thin.
“It’s important to resist the temptation to go alone, as every successful entrepreneur knows that teamwork is key,” said Tanika Nelson, owner and head designer of Nika’s Cupcake Bar, in an email. “As a new business owner, there are abundant resources available to help you build a solid foundation for your enterprise,” she said.
Nelson suggests networking with other business owners, as well as looking for small-business organizations and associations in your community. Small Business Development Centers, or SBDCs, for example, can help provide free or low-cost training and other tools for new entrepreneurs.
Slade also recommends seeking advice from lawyers, accountants and consultants, even if you have to work these services into your startup budget. “These professionals can provide valuable guidance on legal and financial issues, as well as an overall business strategy,” said Slade.
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Randa Kriss writes for NerdWallet. Email: [email protected].