The scores of new businesses starting each year can benefit from mistakes made by failed businesses. Directors of some of the state’s small business development centers (SBDC), along with the Mississippi Development Authority (MDA), see the positive side of pointing out some of the most common errors new businesses make.
To start out on the right foot, Greg Butler, director of the Jones County Junior College Small Business Development Center, advises budding business owners to meet with their area SBDC.
“That way they can receive help for the planning process, find out what it takes to start a business, learn the legal and regulatory requirements such as zoning, hear about sources of funding and get assistance developing a business plan and financial projection,” he said. “The most common mistakes we see are improper planning, not understanding the business and the industry itself that they’re going into and not knowing the target market and the competition. These errors could be avoided with research.”
The MDA’s Existing Business and Industry Division stands ready to help anyone wanting to begin a business. Spokesman John Brandon says common pitfalls to avoid include: lack of knowledge of running a business; not investing in people; competing on price alone; and, undercapitalizing the business.
“It is important for entrepreneurs to look at their former jobs as an apprenticeship to running a business,” he said. “Pay attention to all aspects of business, not just your job. Also, entrepreneurs often think their idea for a business is what will make the company successful. Actually, it is the people who make a business successful, not the product. Business owners need to focus on building a great company as much as they do a great product.”
Brandon points out that customers are looking for value in addition to price, and that small businesses have the opportunity to provide that value.
He also cautions that starting with a limited capital investment is a problem. “In addition to taking several months or more to reach a profitable level of sales, the business must re-coop startup costs and investments in equipment, fixtures, facilities and training,” he said. “Entrepreneurs should plan carefully what the initial startup expenses will be, as well as potential sales goals in order to determine just how much money it will take to sustain the business during the early growth stages.”
Jim Harper, director of the Hinds Community College Small Business Development Center, notes some positive points for anyone contemplating starting a business.
“Consider what kind of corporation you want to become, what works best — be frugal with what you ask for, make sure it’s needed in the business,” he said. “Also, keep sales goals on a chart so it’s a visual thing and track them monthly. Know your break-even point so you won’t be surprised. I pretty much insist on that.”
Harper says existing businesses can also benefit from some common errors he sees. Those may include a need for better organization, unnecessary expense and advertising that is not reaching the desired client base. Other slipups are not posting sales and not following a business plan.
“We try to develop that for them and see a lot of existing businesses on that point,” he said. “The entrepreneurial spirit continues to grow, but we’re trying to be cautious. We don’t want any failure.”
A retired executive in the machine tool business, Don Fischer grew up in sales and service and uses that background to assist small businesses at the University of Mississippi Small Business Development Center in Oxford.
“The first mistake I see is lack of management skills — not lack of funds or expertise — and lack of planning, organizing and controlling,” he said. “Planning and controlling are the most important. I notice that because most start without a business plan.”
Contact MBJ contributing writer Lynn Lofton at email@example.com.