Here are some of the most common mistakes small business owners make as freelancers or highly skilled entrepreneurs to crash land.
There are tons of opportunities online for freelancers and entrepreneurs. One can register as a seller on a marketplace like Amazon to start selling or build a blog around the expertise to sell skills as a service as a freelancer.
Opportunities are endless.
When there are more choices, the paradox of choice will take over.
It is important to realize that there are no guaranteed methods to succeed in an online business. But there are some common mistakes small online businesses owners and freelancers make which can hurt.
So, here are some of the mistakes small business owners make as freelancers or highly skilled entrepreneurs to crash land.
1. Doesn’t Focus on Cash Flows
The success and failure of any business depend on the amount of money it can, or it will generate for the founders.
The sooner a business generates positive cash flow, the longer it can survive,
Starting an online business doesn’t require a fortune, but if founders try to work out everything on trial and error method, it can suck up the cash from the business very fast.
Some business owners tend to have a mindset of spending amount on non-trivial things which don’t impact too much of either the top-line or bottom line.
The main reason they stumble.
Let’s assume you already own a brick and mortar shop.
Now you plan to sell your products on Amazon or Flipkart. What you need to do is register your business on these marketplaces. It will generate an additional source of revenue by making more sales on such platforms. It doesn’t need to set up a complete eCommerce site like Amazon. On the other hand, as an eCommerce platform, one has to work on providing some unique value to the end user. One can’t just beat Amazon on the marketing.
2. Not Spending on Essential Things
Most business owners those who don’t overspend falls in the category of underspending. Not even spending a dime to kick start the business won’t get you anywhere.
In the world of online business, having a domain and good quality host is a must. Hosting as a business is a race to the bottom in terms of pricing for sure. At Rs99 (Under USD1.5) per month, everything unlimited is on offer. One has to realize at that price; it is tough to get good quality hosting service for sure.
One should be ready to go for a mix of good quality and lower price. Spending on good quality hosting is essential. Not investing will severely limit your potential for success without you even realizing.
3. Working IN the Business and not ON the Business
The reason you want to be a freelancer or do an online business is, you want to free yourself from the 9 to 5 Job.
Let me first set what it means when working in business vs. on the business.
Working IN the business
- Writing programs
- Answering customer queries
Anything that directly impacts the business
Working ON the business
- Planning for the future
- Setting goals
- Measuring success
- Automating processes
Anything that indirectly helps the business grow.
It is good to learn things about online business. It could be anything between marketing, SEO, sales, etc. But doing each and everything yourself is destructive and won’t give fruitful results.
Effective distribution of work can be time-saving for new small business owners. It will free up a lot of time for the crucial time of the founder for business activities like planning, strategy, and growth.
There are certain activities which make you fall in the time-wasting trap. As an example, posting on social media can always be done by someone else once you have laid out the strategy for it.
4. Focus on Revenue Growth Instead of Profit Growth
A widespread mistake among entrepreneurs and small business owners is to focus on revenue growth instead of profit growth.
Revenue is total sales. Profit is whatever is left after deducting expenses from revenue. Let me explain the difference between revenue and profit with an example.
As a product, the aim should be to sell more. But often it means the sales are at a price where the profits will come later only after reaching a certain number of transactions per month. It can be a good choice in some cases or at a very early stage of product development where one grows on revenue and profit eventually but being profitable as early as possible will always help prosper.
As a business, it is essential it works for itself even if it doesn’t pay the founders. If founders have to keep funding it, at a point, it will take its toll. It is one of the main reason for many startup failures.
When the focus is on revenue growth, it becomes tough to sustain the business for an elongated period.
5. Lack of Planning
Planning is crucial to any business to get things done correctly within the correct time frame, but it is also boring and time-consuming.
- In the efficiency of the business
- Reduces the risks involved in modern business activities
- Facilitates proper coordination within an organization
- Aids in organizing available resources properly
- Gives the right direction to the organization
- Maintains good control over performance
- Helps to achieve the objectives of the business
- It motivates to keep moving forward
- Encourages creativity and innovation
- Assists in making a proper decision
The reason behind the majority of online business failing is lack of planning.
6. No Clear Goals
After plan, business goals are the second most important thing that many business owners lag. Goals should be set and articulated to achieve specific objectives.
The success of a business depends on the ability to set and achieve goals. They should be specific, measurable, achievable, relevant, and time-bound.
As an example: “Get two high paying clients worth Rs.50000 each in next three months” is more powerful, concrete and precise goal compared to “Getting more clients in the current year.”
Without a clear goal of what one wants to achieve, efforts go nowhere. Hence, set a goal before starting a business. Always remember to be SMART (Specific, Measurable, Achievable, Relevant, Time-Bound) in setting the goal.
SMART (Specific, Measurable, Achievable, Relevant, Time-Bound)
- Specific – Having a specific goal will help take better decision for the business. If something doesn’t align with the goal, it will be easy to say NO which is very important for any online business to flourish.
- Measurable – A goal without measure is similar to competition without a scoreboard. One needs to measure the progress in acknowledging what’s working and what’s not. Measurable goals help understand whether they are going in the right direction or not.
- Achievable – Online businesses set goals that are beyond reach. Instead of planning an achievable goal they dream big without a firm foothold on reality. When goals don’t seem to get achieved, one can quickly lose confidence.
- Relevant – Relevancy is another critical point in setting the goal. Any business owner might desire to increase their revenue by 50% in a year without considering the market condition. If new competitors enter the market, the specific goal becomes immediately irrelevant. In other words, business goals must match the realities of the niche market.
- Time Bound – All business goals are meaningless if they aren’t time bound. A time frame is an essential element to setting goals. Whether one wants to achieve specific revenue growth, increase sales by 50% or get new clients, it will have to set a time limit to accomplish it.
So always have a SMART goal.
7. Undervaluing a Product or Services
Small business owners underestimate their products or services due to lack of confidence. The fear of failure grips them so tightly that they can’t figure the true worth of their product or services.
As a result, they down value their price and end getting a little to no business. Low pricing immediately outruns the unique value that a product or service brings to the customer.
So, what should small business owners be doing to tackle this problem?
Thorough market research and competitor analysis can help identify a better price point to start.
8. Not Embracing New Technology
We all know the story of Nokia and Blackberry. They didn’t embrace the new technology and so out of business now. It can happen to any business in the information age.
If you are a web developer, moving to be an App developer or anything that can help grow is a must. Latest technology in business will not only open doors to new opportunities but also helps in doing day-to-day work more efficiently.
Social media platforms like Facebook, Twitter, Pinterest, LinkedIn, and Youtube are hot favorites as of today, but new ways to reach customers are always coming up. If not open to accepting new, one can miss a fortune.
9. No Focus on Marketing
I believe in
“Great marketing only makes a bad product fail faster.”- David Ogilvy
So if you aren’t marketing, you will never know if the product or services for that matter you provide is good or bad.
Without marketing how will business reach its potential customers?
In an online world, often it is assumed, great product will find its customer. Maybe, maybe not. But not at the rate you want.
One can always spend a minimal amount on Google or Facebook Ads to reach out to more customer.
Start with a small budget with a proper strategy.
10. No Visualization of an Ideal Customer
Every business owner either small or big must visualize their ideal customer. The higher the clarity a business has about the need of customers the better.
To define an ideal customer the business
- What benefits the product or service bring to the customer?
- What problems does the product or services solve?
- Does the product or services satisfy the need of the customer?
In short how the product or services improve the customer’s life?
Even define the age, education level, occupation, lifestyle, income, and financial status of the customers.
The reason why most of the small business owners fail is their inability to define an ideal customer.
11. Aiming very High Growth
Certain things take time, and one can’t do anything about it. I am a firm believer of a Warren Buffet Quote:
You can’t produce a baby in one month by getting nine women pregnant. –
So things take time.
The same applies to business.
Even if the business doesn’t need time to set up, to make the most of the opportunity, you have to make sure; you know the ins and outs of it before making it to the next level.
So if you aren’t ready to wait it out and be in it for the long-term, you may not be able to scale it up the way it should be.
As long as one isn’t making too many mistakes, it should be fine.
Often it is always the case where you still want to grow and grow fast but remember the fast growth can be a curse as well.