4 Mistakes that Hurt Small Businesses in the Long Run


Only 50 percent of businesses survive the first five years, and a third of businesses survive past 10 years. As expected, the longer the business has been around, the higher the probability of survival. This means the first few years are crucial to establish your business and keep it afloat. While you might think the initial launch is the hardest part of running a business, there are actually many growing pains that occur and can stop growth immediately. Here are four common mistakes that small-business owners make that actually do more harm than good.

Premature Scaling

Small Businesses

Premature scaling is the phenomenon known as growing out your business exponentially instead of at a steady pace. This is often the case with software companies and agencies that see a sudden influx of demand and respond accordingly. The company might land several clients at once (or a major client) and then hire multiple full-time employees to cover the work. Once a few of the clients leave — or a major project is completed — the amount of income is less than the costs to keep the employees on staff. As a result, the business loses money or has to lay off the employees.

It’s better to scale slowly and know when to turn down projects that you know you can’t handle than to rush business growth to accommodate short-term goals.

Trying to Do it All on Your Own

If a small-business owner isn’t prematurely hiring too many people to handle the workload, they’re typically hiring too few people. This might be the case of a sole proprietorship, where the founder works eight hours per week to make sure everything is just the way he or she likes it, or a small business that continuously asks more of its employees without increasing their pay or benefits.

Not only does this lead to burnout, but it can also lead to a high employee turnover rate and frustration from the people you work with. Instead, brands need to know when they should increase the amount of help within the company. One option to increase flexibility is contract work. Contracting vendors and freelancers keeps overhead low and allows companies to grow and shrink with the seasons while still keeping their books in the black.

International Production

Most small-business owners strive to keep production costs as low as possible — especially if they’re self-funded. This can become problematic when they continue cutting corners in most forms of production and marketing. Many companies try to produce their items internationally because they think it’s a more affordable option, but this actually makes it harder to scale and control in the long run.

Amway is one example of a company that learned the benefits or producing on a national level. The company discovered that 85 percent of their production costs were raw materials, and labor was another six percent. As long as the bulk of the costs remained flat, it didn’t matter much where the items were created, and in many cases it was actually easier to make them in America.

Being Inflexible to Market Changes

Blackberry is the quintessential example of a brand failing to change with the market and audience demand. The company was once a leader in cellphone technology, but fell by the wayside when it couldn’t compete with Apple and Android devices. As a business owner, your focus needs to be just as much on what the audience wants as your actual product. If there’s a dissonance between the two, then you have two choices: change to meet your customer’s’ needs, or keep selling the same thing until you’re out of business. Flexibility is key, especially in highly innovative and competitive industries.

Many of these mistakes are penny smart but dollar foolish, meaning they’re ideas that seem smart in the short run and might save a little money, but they can do significant damage in the long run. Next time you think you have a great idea to save a little money, make sure you won’t regret the long-term implications of this plan.



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