1. Inaccurately gauging demand for your product or service.
Too many small businesses fail because the owner overestimates demand. Before launching your venture, find out how strong the demand is for your product or service. Is it a product or service that most people need or want? Does it fit with current trends?
2. Entering a crowded market without a distinct competitive advantage.
You may cook an incomparably delicious hamburger, but before you try to build a business around that talent, think about how you are going to distinguish your business from every other hamburger restaurant. Without a well-defined competitive advantage, it's tough to compete in a marketplace like the restaurant business where it typically takes a lot of time and money to build a viable brand.
3. Forgetting to count the costs.
Like any other large-scale project, successfully launching a business requires a thorough, upfront accounting of costs, both financial and personal. Under capitalization is one of the top reasons for business failure, so before you launch, make sure you have a detailed budget that includes not only startup costs but the living expenses you'll have to take on before your business can start paying you. It's best to assume it will cost more and take longer than you initially think it will.
4. Failing to delegate and ignoring critical functions.
No one person is great at every facet of running a business, so make sure you identify each critical function and delegate tasks to the best person to get the job done. Use your strengths to the company's best advantage and offload functions that others can do better.
5. Not planning for profitability.
One of the first things you should do when making a business plan is to define the business model. Before you can succeed in any type of business, you'll need to know your profit model inside and out. What is your gross margin on sales? Your net margin? How many sales do you need to break even each day or week? What is the worst case scenario, and how would you overcome it? Establish the key performance indicators (KPIs) for your business that will let you know how your company is performing.
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