1. Being too reliant on one person, typically the business owner.
By relying entirely on one person you are setting yourself up for disaster if he or she gets sick and cannot run the business. You should have trusted partners or skilled employees trained and able to take over in the event of an emergency.
2. Not having a proper accounting system in place.
Good bookkeeping is essential to the success of your business. “Hire a capable and effective CPA to assist you and keep you on top of all accounting-related government rules and regulations,” says Paul MacDonald, senior vice president, Aon. “There are also easy-to-use computer programs available to assist you in keeping track of your financials.”
3. Underestimating the financial requirements of the business.
Be honest with yourself about financial requirements. Most entrepreneurs underestimate the required start-up capital. If you consider that you are likely going to lose money in the first six months to a year of your new business, you need to ensure that you have arranged for sufficient capital to cover operating losses.
“Most entrepreneurs also underestimate the importance of insuring their business. According to MacDonald,” All entrepreneurs should consider their insurance needs carefully to protect themselves and their business against workplace accidents, theft, property damage and other calamities.”
4. Not understanding your target market.
Understand everything you can about your customer. Get market research reports on their demographics, preferences, geographic distribution, and disposable income. You need to understand the needs of the market before going ahead with your product or service. During a period of recession it might not be the right time to start a high-end retail operation, but what about credit counseling?
5. Underestimating time and personal commitment involved in starting your own business.
Most small business owners work more hours for themselves than they ever did for someone else. There is a large amount of sacrifice involved in owning your own business and you have to be prepared for the commitment of both time and money.
6. Overestimating your abilities and not looking for help.
Perform a SWOT analysis on yourself. What are your strengths and weaknesses? Be clear about what you can and cannot do for the business and hire, or seek advice from, people who can help the areas in which you are weaker.
More information on the dos and don’ts of small businesses is available online at www.aon.com.