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The dirty dozen -- 12 classic small business
blunders
By Jenny
C. McCune Bankrate.com
 These
are the classics that you don't want to collect: classic blunders
that can trip up a small business. These are mistakes that, while
new to you, happen over and over again.
History doesn't have to repeat itself, though.
Here's a complete list to help you learn from others' blunders.
Mistake One: Trying
to compete without a game plan.
"It's valuable to put your plan in writing,
but most people skip that step or only do it after they make mistakes,"
says Tami Gaines, CEO of Digital Hatchery LLC, a business accelerator
based in Little Falls, N.J.
Mistake Two: Starting
a business in a field that you know little or nothing about, and
failing to bone up on the topic before you start your business.
"We had a gourmet chef come to us who wanted
to start a dot-com targeting fathers of sports-minded kids," Gaines
says. "He had no kids, wasn't married. How he came up with that
idea and thought that he could bring it off is beyond me."
Mistake Three: Failing
to make up for your own weaknesses when hiring your management team.
Frederick J. Beste, president and CEO of the
Mid-Atlantic Venture Funds LP of Bethlehem, Pa., calls it the "Building
a Better Mousetrap" snare. A group of inventors build the perfect
product, but they have no idea how to sell it. Or on the flip side,
it could be a marketing guru who fails to get the technical expertise
required to get a new product off the ground.
Mistake Four: Going
first class from the get-go.
"Show me a startup in fancy space with lots
of glass and chrome, all-new furniture and equipment and a management
team drawing salaries at least equal to their old ones, and I will
show you a prescription for failure," Beste says. "This is analogous
to throwing a graduation party for yourself in the first semester
of your freshman year."
Mistake Five: Proceeding
with insufficient capital.
It's hard to raise money, so owners of fledgling
businesses will generally opt to forge ahead even though they know
deep down in their hearts that their pockets aren't deep enough.
They'll just assume that they'll make up for the economic shortfall
down the road. However, without adequate financing, your company
will never make it to the next capital fueling stop, Gaines argues.
Mistake Six: Placing
love over logic.
You fall in love with your product or service
without finding out whether your interest is shared with potential
customers, says LaRue Boyd, director of entrepreneurship at the
Daniels College of Business at the University of Denver, in Colorado.
It's important to do your homework and ascertain demand before you
proceed to try to market your wares, he adds. "Maybe you're selling
purple pansies and the market wants yellow roses," she says. "You
go great guns with purple pansies and before you know it you're
out of business."
Mistake Seven: Placing
logic over love.
While you need a cold, objective eye on your
product, you also need to have passion if you expect to convince
others to try your product. "Only love can see you through the inevitable
mistakes and hard times," Boyd explains.
Mistake Eight: Taking
the shotgun marketing approach.
Trying to be all things to all consumers generally
fails, Boyd says. A small business needs to have a laser-like focus
on customers, their needs and how the company can fulfill those
needs.
Mistake Nine: Refusing
to admit you're wrong.
It's bad enough to misjudge a market or a product.
But owners of small companies tend to compound that error by failing
to admit it and then failing to make changes that could save the
business. "They're too close to their companies so they can't see
their problems and head them off," Gaines says
Mistake Ten: Overestimating
your company and underestimating your competitors.
"I see this all the time," Gaines says. "A company
will come to me and when I ask them about competition, they say
they have no competition. Or, when I mention some competitors, then
they say they don't count. 'We've got something that nobody else
has.' Right."
Mistake Eleven: Not
keeping a tight rein on costs.
Early successes can lead a company to forget
frugality and let costs spiral out of control. "As you expand from
garage-quality space to an industrial park, as you finally hire
that chief financial officer, as you install the new computer system,
as you bring on additional production equipment, your break-even
level will creep, maybe even gallop, inexorably higher and higher,"
Beste says. In fact, revenue may soon fail to keep up with the rapid
pace of your expenses, leading your company into deep trouble.
Mistake Twelve: Letting
early successes go to your head.
A new business will start reaping in orders
and its owner will decide he can slack off on marketing. "After
the first big contract, he'll decide to close up the marketing umbrella
and take it inside," Gaines says. "You need to keep up with marketing,
no matter what."
Make sure you don't add your business to this
collection of classics.
Jenny C. McCune is a contributing
editor based in Montana
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