Top 8 Mistakes New Business Owners Make

#8. Starting a Business As A Hobby
You'll often hear a budding businessowner say, "I want to start a ____ business" . There are two big problems with this kind of thinking First, it makes a very dangerous assumption. It assumes that there is even a market for that particular type of business. For example, if you want to start an interior design business just because you're an interior designer, you're potentially setting yourself up for failure. If there is no demand for interior designers in your area, your business will fail. The second problem with the above statement is the word "I". Starting a business is not about doing what you want to do; it's about fulfilling a need in the marketplace. There are plenty of people who try to make a living doing whatever they want to do, and they are always broke. Some people call them "bums."

#7. Not Accepting Popular Payment Methods
Have you ever walked into a restaurant that said "No checks" or "Cash only"? This is a surefire way to convince customers not to give you any money. Not accepting a popular payment method -- whatever the reason -- is just plain stupid. Putting up a sign that says "No credit card for purchases under $x.xx" is equally stupid, and likely a violation of the merchant agreement. Many businessowners refuse to accept popular payment types because of the associated expenses. They fail to take into account the fact that by accepting all payment types, more customers actually walk in the door, and the added revenue makes up for all those expenses and then some.

#6. Being Cheap
What do you do when your business is starving for cash? Many businessowners would answer, "Starve it some more." But being cheap -- switching to inferior products, reducing inventory, cutting back on employees or marketing -- is like refusing to eat because you're low on food. In order for a business to survive, there must be cash flow. Cash must flow in, and it must flow out. If either flow is stopped, the entire business halts. Being cheap only speeds up this process. Instead of being cheap, spend money on cash generating activities, and cut back only on things that do not help cash flow.

#5. Failing to Outsource or Hire Employees
Many businessowners have huge egos and live by the credo, "If you want it done right, you have to do it yourself." This attitude is suicide in business. As a business grows, more people will be required. If more personnel are not brought onboard to fulfill new business functions, the growth will be short lived, the business will return to its former state, and the businessowner will be sorely disappointed. Of course, simply hiring more people is not enough. The businessowner must actively delegate roles to these employees and allow them to fulfill them.

#4. Not Being Profitable
The primary function of a business is to create a profit for the shareholders. If you're the only owner, then that's you. Your goal is not to make friends, to "give back", or to be a charity. Your primary function is to make a profit, and to do that you must have a good handle on your cash flow. A constantly negative cash flow is a great way to fail in business. Everything you do must be geared toward generating profits. This might mean spending more time marketing or selling and less time rearranging the shelves or shuffling papers. Or it might mean adding more merchandise to inventory.

#3. Trying To Be All Things to All People
Some businessowners get queasy at the thought of a person looking at their business and not buying. They assume that if someone doesn't take an interest in their business, they must be doing something wrong. And so they try to find some way to make their business appealing to this group or that group of people. There are two problems with this approach. First, attempting to reach a particular group is useless if that group has no need or desire for your product or service. Second, it makes the business look desperate and phony. A good example is the way many companies are "going green" to appeal to a popular trend. Even the companies who obviously have no interest in "green living" are talking the talk because they hope it will make people pay attention to them. It doesn't work.

#2. Not Understanding Who The Customers Are
There is no business on earth whose customers are "everyone." This is an ugly side effect of trying to be all things to all people. Some businessowners assume their customer demographic is anyone who is human with a pulse. That is very wrong. By understanding who your customers are and what makes them tick, you can cater to them and even become their favorite business. Understanding them allows you to build rapport and develop an emotional connection with them. But failing to understand them makes you just another commodity, and they will happily leave your business for one where they feel less like a dollar sign and more like a person.

#1. Not Marketing The Business Properly or At All
Ad reps frequently prey on new businessowners, trying to sell them advertising space in the phone book, a coupon book, radio, or television. The irony is that most ad reps are just as clueless about effective marketing as the novice businessowner. Most businessowners understand there is a need to advertise and get the word about their business out there, they just don't know how. Throwing an ad that has the business name, address, and phone number, and that looks like all the rest of the ads is hardly going to cut it. Effective marketing begins at home, and the businessowner must be the driving force behind it. I offer more detailed advice on effective marketing on my website, ChristianFinancialFreedom.com