6 Mistakes Every Small Business Must Avoid How to not add your name to the one-fifth of small business that don't make it past their first year.
Opinions expressed by Entrepreneur contributors are their own.
Small businesses are fueling innovation and bridging critical gaps in virtually every industry. According to Semrush, small businesses also create 1.5 million jobs and account for 64% of all new jobs in the U.S.
Of course, the purpose for venturing into entrepreneurship differs from one business owner to another. While some are passion-driven, others are motivated by a desire to quit their jobs in pursuit of freedom to control their time and create their own path to success.
While the purpose may differ, the goal is the same: every entrepreneur wants to succeed. However, not everyone will do so: Just over 20% of small business don't make it past their first year, according to the Bureau of Labor Statistics, while nearly two-thirds last for two years, and about half survive for five years.
Toeing the entrepreneur path is akin to venturing into the wild, as you are unsure of what awaits you and what the future holds. But with technology advancing, making how we do business more flexible than in the traditional brick-and-mortar paradigms, one thing is certain: we will continue to see growth in small businesses.
The role of revenue in the small business DNA
Various factors lead to so many enterprises biting the dust before they even get a footing, but among the most critical is revenue. This, of course, is at the heart of every company — the fuel that gets every other part of operations moving.
There are several ways to generate revenue, including selling products or services, charging fees and generating advertising income. The funds generated allow for the paying of expenses such as rent, utilities and salaries. In addition, revenue can be used to reinvest in the business in the form of new equipment or the hiring of additional employees. It's also important because it determines profitability: A business that does not generate enough will eventually go out of business.
Here are some key missteps that lead to insufficient revenue:
1. Not determining objectives and goals
Small businesses can easily fall into the trap of not being clear about what their goal is, or will be. Without this, it's difficult to formulate strategies that culminate in revenue.
Aimlessness is inevitable when the purpose of something is not known, and that applies to small entrepreneurial ventures. As long as objectives and goals are not defined, plans for generating revenue will ultimately fall apart.
2. Ineffective marketing strategy
Marketing is the center of gravity for just about every business — the door and window that gives a brand accessibility and visibility. It anchors everything, as marketing leads to sales, but what happens when marketing is not effectively executed?
Small businesses are susceptible to this the most, as they often can't boast the financial capacity of bigger operations. They may not even have a website and/or social media handles to drive marketing, and can't afford to pay for the services of content marketers or influencers. These factors are potent enough to significantly hamper revenue.
3. Poor or lacking online visibility
Any business that isn't getting visibility doesn't have a chance at surviving, as this world is about survival of the fittest. The more a brand has, the more it gets noticed by a target audience, and with the continued impact and influence of social media, there are more than enough options for driving it. This could take the form of text, videos, audio, images or a combination of any or all of these mediums.
4. Not focusing on repeat customers
This is a common mistake that many make but are unaware of most of the time. While it's certainly appealing to have new customers come in through the door, it's more important to focus on existing ones. Repeat customers are the engine that propels profitability, because they have built trust in you and are happy to do business with you. They are also easier to retain, as you don't need to engage in marketing to convince them or otherwise get their attention, as you would with a new customer.
5. Failure to adopt a modern sales funnel system
As times change, so too does customer behavior, and small businesses need to innovatively catch up with trends to meet customers' needs. Gone are the days in which customers go through the lines of a sales funnel: With so many platforms such as social media, social proofs and testimonies over the internet, potential clients can simply look up a product or service and proceed to buy it. Those not smart enough to take advantage of spaces like this will miss out.
6. Not properly honing price strategy
Price is a key component in the decision phases for any business, and not knowing how or when to adjust it has the potential to do real damage. There will certainly be factors like demand and supply that affect pricing, but a sudden hike won't go down well with customers, and they may look elsewhere. When you don't adjust appropriately, it could come at a heavy price.