When you’re a small business owner, you shoulder a huge amount of responsibility. You can often end up single-handedly balancing the roles of administrator, marketer, finance officer and customer service manager, so it’s no wonder that there are a few pitfalls that you might encounter along the way. Here are some of the most common mistakes that small business owners can make and our top tips for avoiding them.
1. Underpricing yourself
In the early days of your business, knowing how to price your product or service can be a minefield. Small businesses often underprice their expertise at the start, which can be a difficult hole to climb out of. It's important to make sure that your prices are competitive, fair and reasonable and that they provide you with a decent profit margin.
One tactic that can be helpful here is keeping an eye on your competitors in order to gauge the average market rate for your product or service. Checking in on your pricing regularly should help you avoid selling yourself short and ensure fair payment for your work.
2. Waiting too long to hire
While it’s inevitable that you’ll be responsible for everything when you first start out, it’s important to recognise when to start expanding your operation. If you’re struggling to meet demand, this can often be a great time to experiment with expansion. Whether you hire an employee to help deliver your product or service or to handle a specific function like administration, taking on an extra pair of hands can be an important step in growing a small business.
3. Neglecting to build a professional network
Working in an office usually provides automatic access to a network of like-minded individuals who work in the same industry. Small business owners and freelancers, however, need to work to create a community. It might not be a task that’s at the top of your list, but having your own professional network can open the door to a whole world of opportunities.
From gaining the support of those facing the same challenges as you to learning insider industry tips and tricks, taking the time to get acquainted with your peers can be hugely rewarding. When they have more work than they can handle, they may even recommend you to their customers. Try digging about online to see what relevant groups you could join and then get networking.
4. Using the same bank account for your personal and business finances
Opening a business bank account can sometimes feel like a scary step for new business owners but it’s an extremely important one. Although not legally essential, having separate bank accounts for your business and personal finances is something that HMRC strongly recommends.
As well as keeping all of your business costs in one central place, having a dedicated business bank account also provides you with a clearer picture of your cashflow. If this isn’t enough to persuade you, it’s worth noting that having a business bank account can appear much more professional to customers and suppliers alike.
5. Underestimating the value of marketing
Marketing can be a daunting prospect if you’re completely new to it but choosing not to invest at least a bit of time and effort into marketing your small business can be risky. Not only could you lose out on a host of prospective new customers, you could also fail to retain your existing ones.
Fortunately, marketing your small business can be a fairly straightforward affair once you’ve mastered the basics. Most small businesses can get started with just a business card, social media profiles and some business networking to get the message out. Once you’re up and running, investing in a freelance designer or agency to create a website is a great idea.
If you follow these steps and keep going with your social media activity, you'll have the fundamentals of a winning small business marketing strategy.
6. Putting your personal life on hold
You’d be hard pressed to find a small business owner who hasn’t ever prioritised their work over their personal life. When you’re the driving force behind the success of your business, it can be difficult to take your foot off the gas. A work-life balance can be notoriously tricky to achieve but it’s well worth the effort.
7. Neglecting your professional development
When you have customers paying for your expertise, it might feel like you already have all the skills you need for your business to succeed. However, if you can dedicate some time to learning a new skill or improving an existing one, you might be surprised at how much this could benefit your business. If you don’t feel up to a full-on professional qualification, why not check out the wide range of free online courses available from providers like The Open University.
8. Failing to plan for the long term
Once your business is up and running and you’re achieving your day-to-day objectives, it’s important not to neglect your long-term goals. While capturing these in a formal business plan can be extremely helpful, it’s not essential. As long as you have an idea of where you’d like your business to be in the next five to ten years, you’ll have something to prepare for and strive towards.
9. Ignoring your accounting responsibilities
Last but not least: the dreaded issue of small business finances. Aside from accounting professionals, very few people glean much joy from managing their accounts but like it or not, keeping your books in good order is essential for any business.
Failing to properly record and submit your finances to HMRC could not only land you with a hefty fine, it could land you in sticky legal territory too. Managing your small business finances successfully depends on many different factors, so why not dig into our comprehensive collection of jargon-free accounting guides to find out where you might have some room for improvement.
If you find that accounting is your biggest small business headache, let FreeAgent’s award-winning online accounting software help you out. Start your 30-day free trial today.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.