Starting a business is a complex adventure that takes many people out of their comfort zones. As such, many people who start businesses make mistakes early on that prove ultimately detrimental to their businesses. It doesn’t have to be this way. One of the best things you can do for yourself is to learn from the mistakes of those who have gone before you. Let’s look at 5 big mistakes people make when they start businesses, how those mistakes can hurt your business and what to do to avoid these mistakes.

Buying things you don’t need

While it’s understandable that you may want to announce the arrival of your new business spending big on things like cars, getting premises and recognisable branding can hurt your business’s finances. Managing a business involves balancing critical resources while meeting the goal of the business, which is to create customers (in case you were wondering). Many businesses struggle with keeping finances in check and ultimately fail because of financial problems. You’re better off spending your limited money on things that bring in more customers while keeping commitments like rent and lease payments to a minimum. In time the business will justify these outlays.

Not planning well

We stress the importance of solid business plans here and that’s not just because we sell them. Great business plans lay out the course of action for your business as you establish yourself and grow. Without a proper plan in place, you are prone to jumping from one thing to the next in an attempt to find footing. This approach seldom if ever works out well for anyone. Make sure you have a good business plan before setting out and remember that things will more likely than not change. So make adjustments to your business plan as you learn new things.

Not surrounding yourself with the best

It doesn’t take much for a business to fail. Bad luck can destroy you but good luck rarely leads to business success. To succeed in business you need to get pretty much everything right and the way to do this is to work with the best people in each position. A poor salesperson can ruin a great advertising campaign. The trouble is great people often cost a lot. As we discussed before businesses are often operating with limited resources money being chief among them. So the temptation to compromise on quality people often wins. However, this hurts the business by not getting the best out of other resources. It’s better to pay for quality.

Not understanding cash flow

Businesses operate with a profit motive but businesses more often fail because of cash flow problems. Profit and cash flow are not the same things and this often happens because of the accrual perspective and tying up cash. An accrual system offers credit for products, you may make a theoretical profit when someone buys on credit but the profit is only realised when they pay. This leads us right into the second concept of tying up cash. When you buy inventory that is money tied up for as long as the inventory doesn’t sell and until it is paid for. In the meantime, other expenses will continue to come due. Working with this in mind can help you avoid the cash flow conundrum that sinks many businesses.

Not adapting

When you go into business you have ideas of how things should work. Ask anyone who has been involved in business long enough they will tell you that the market rarely works the way you have planned for it to. The businesses that succeed heed the “advice” quickly and adapt to the situation. Reasons to adapt can come from customers, legislation, global events and other environmental factors. These are things that Zimbabwean businesses in particular have had to deal with in the last two years at least. Learn to adapt where necessary and be ready to let go of an idea you hold on to for progress.

These mistakes have claimed the scalps of many businesses but they do not have to claim yours when you go into business. Find examples of the aforementioned mistakes and learn how they were overcome.