Learning from the past: 13 common mistakes to avoid when starting a business

Learning from the past: 13 common mistakes to avoid when starting a business

Mistakes often get a bad rap, don’t they? We’re told to cover up mistakes or blame them on other people, doing everything we can to separate ourselves from the awful burden of doing something wrong.

Most people don’t start a business because they’re afraid to make mistakes.   However, business mistakes don’t stop your momentum, they help you figure out a better path. One of the best confidence-building strategies is treating your mistakes as learning experiences. In the world of entrepreneurship, you’re going to make a lot of mistakes. You can’t avoid all of them. 

Fortunately, you can plan to avoid some of them– at least the most common ones. This article will walk you through some common mistakes, and tips for avoiding business failure. 

13 common small business mistakes

The early stage of any business is an exciting phase. There’s a world of possibilities open ahead of you. However, it is also a critical phase because the mistakes that you make while your business is still small, if unresolved, may fester, eventually turn malignant and lead to fatal weaknesses. 

While it’s true that the best lessons are learnt from one’s own mistakes, it’s surely wise to learn from those that others have made before you. To that end, let’s take a deeper look at the common mistakes small business owners make, and how you can get a headstart on avoiding them:

1. Not writing a business plan

Writing a business plan is an important part of creating a sustainable business and standing out from the competition. A strategic business plan creates momentum, which means that because you have a clear and researched idea, you are inspired to succeed. 

But many new entrepreneurs begin their venture without thinking about the big picture. They have a lack of understanding about the market, financials, business models, or logistics, and this can cost time, money, and effort when things go wrong. 

Avoid this common mistake by creating a business plan to help identify the unknowns and spot the gaps you need to fill. Do you need to work with a third-party logistics provider or ship yourself? How will you manufacture products? Who are you selling to? Plenty of questions such as these will pop up along the way.

A sound business plan will help you tackle many such questions right at the outset. And further, your business plan will guide you in answering the many unanticipated questions that emerge. Every decision you take should relate back to your business plan. This helps you stay on track to meet your business’ needs and goals—and build one that doesn’t fail. Not sure where to start? Use the resources linked below to guide you.

Additional resources:

2. Not focusing on cash flow and profits

One financial mistake entrepreneurs make is not paying attention to cash flow and profits. 

Ask any seasoned entrepreneur what the most important skill in running a business is, they’ll say it’s math. Many of them don’t pay as much attention to the numbers as they should.

Business math works quite simply. To see how profitable your business can be, use this formula: 

Profit = Demand x (Revenue - Expenses)

Let’s break down the profit formula above with an exercise. Assume there are 20,000 people searching for your product online per month. If you can put yourself in front of even half of those people, that’s 10,000 potential buyers.

If you convert on an average of between 1% and 2%, that’s 100–200 sales every month. Consider this as the demand for your product.  If your average order value is INR 1000 and you have a net profit margin of 30% (which is your revenue - expenses), your profit will be anything between INR 30000 and INR 60000 per month.  

This seems like child’s play as the math is simple. But it becomes challenging to do over and over on an ongoing basis. Seasoned entrepreneurs develop an instinctive understanding for these number calculations and realise how every decision they take shifts their numbers in one direction or another. Whatever you get into, if you’ve done the math, you know exactly what you’re in for. Avoid this common mistake by keeping track of your potential profits and cash flow using the above formula. And doing it rigorously and repeatedly will help you develop that elusive aptitude for quick business math.

Additional resources: 

3. Not validating your business idea

One of the biggest mistakes you can make when starting a new business is not doing market research. You must learn about the competition and understand how you can differentiate yourself from them. Competition can be other small businesses carrying the same product or service as you, or it can be market giants like Amazon and Flipkart. 

Sometimes entrepreneurs dive into a niche market without determining if it’s a good fit or not. There are cases where a niche has low demand and tight competition with businesses already established in the niche. If that’s the case, you may not want to build a business around it. 

To understand the market landscape, you’ll need to do some research. Find your niche’s competitors and look at:

  • Number of online reviews.
  • Social engagement.
  • Blogging frequency and content.
  • Press coverage.
  • Search engine optimization (SEO) rankings.

You’ll also want to evaluate whether the market is just a trend or if it’s a sustainable category you can grow a presence in over time.

product categories development

With a strong understanding of the market situation, you’ll have no trouble building a business in the right niche.

Additional resources:

4. Adapting without evolving

As your small business faces challenges, you will make changes to adapt to them. Some of those changes may be significant deviations from what you had originally set out to do. Others may be tiny incremental ones that add up to a significant change of course.

In either case, it is necessary to realise that your business works as a whole with many moving parts. And changes in some aspect of your business will often have unseen effects on some other aspects. Eventually, these may not help you achieve your desired outcomes. 

For example, a big mistake new business owners make is selling too many products. Sometimes if one product doesn’t sell well, owners add more products to their store to attract potential customers. This doesn’t always help.

Say you have a store that sells eco-friendly recyclable bags, but no one buys them. So you add more eco-friendly products from your supplier. Eventually, you have a whole medley of products with no relation between them besides being eco-friendly. 

Now, if your branding hasn’t caught up with the changes you’ve made, and is still about bags, it’s going to be hard to attract the right customer for your other eco-friendly products. 

The error in this case is perhaps more of a branding error than a product error. The business had adapted to a challenge, but not evolved as a brand to achieve the desired outcome. 

While significant pivots are sometimes necessary in business, you can avert the mistake of adapting without evolving by comprehensively evaluating the changes you make in your business and recognising its unseen effects. Taking stock of your business on a regular basis will help you meet such challenges head-on.

Additional resources: 

5. Not getting organic marketing right

One common mistake businesses make is not focusing on organic marketing. The lure of paid ads like PPC is reasonable. You pay for an ad, someone clicks through and buys your products. Immediate revenue.  

Apple introduced anti-tracking changes in 2021 diminishing the efficacy of paid ads on iOS devices drastically, by refusing to share user data critical to personalisation. This means, advertisers no longer have the access to information on individual users and their actions like who downloaded an app after seeing a particular ad. Even Google has implemented a similar measure, by allowing users the option of opting out of personalised ads. If selected, Google erases the user's unique advertiser ID – making personalised targeting extremely difficult.  Targeting, in such cases, will be based on factors like the user’s general location and the content of the website they’re visiting.

These measures mean that despite your investments in paid ads, you may not receive as good ROIs or conversions as before. There is no assurance that personalised ads will reach your target customers reliably. 

Given the circumstances, organic marketing channels are emerging as the best option to drive sales for iOS and Android users. 

Organic marketing gives an opportunity to create traffic to your site, for free. For this, you would need to invest upfront in creating content that would lead users to your store. The first three organic searches on google results earn more than 50% of the total click-throughs. For branded search, where the name of the brand is a part of the search term, the numbers are even higher.

Advanced Web Rankings

Source: Advanced Web Ranking

Consider the category of reusable bags here. While writing content for a niche category, at one point, you feel that it is getting repetitive. This is when you strategize your content according to your customers instead of your product. 

Who would potentially want reusable bags? Someone who is environmentally conscious, perhaps? It’s also likely that they are into eating healthy, working out, yoga, and natural wellness. These are all initial hunches, but a little bit of research can confirm them.

By building your content marketing strategy around this ideal customer rather than around a product, you have a lot more to write about and many more ways to connect with your audience.

Even if your niche is very technical and you manage to write 50 to 100 articles just on the nuances of your product, that information will only go so far. To really round off your effort, you’d want to have more in common with your customer than just the fact that they are buying something you sell.

Email newsletters is another way that you can approach your customers. Many start-ups regularly send their weekly product promotions. The trick to get your consumers' attention is how you present and what extra information you are providing them. Some quick tips are to relate the content with trivia, entertainment and current trends. 

The word ‘content’ does not refer to written text only– it also includes videos, podcasts, etc.  India is the third-largest consumer of podcasts (after the US and China), with 57.6 million monthly listeners. 

Social media is a platform where all of these can come together. You can make a narrative about your venture and integrate it across various social media platforms like Instagram, Facebook, LinkedIn and Pinterest. It is important to choose a format that your target audience already consume and double down on the platform.

Additional resources: 

6. Not thinking freebies and contests through

After handing out freebies, it could take some effort to get the customer to eventually pay for your product. Therefore, it is pertinent that you measure the level of interest that they have in the product.

Start by asking basic questions. What is the purpose of this exercise – is it for advertising or building a relationship with the customer or to create general goodwill?

Freebies and contests are essentially to create a buzz for the venture. However, it is not a profitable long term strategy. There should be an enormous amount of research focused on typical customer behaviour before rolling out such offers.  

Now, assuming you have decided on freebies, how do you tackle them? 

Research into your customer, their habits and their intentions. This will help you design a freebie that is attractive for the customer and the best ways to market them. For example, you can always pair up freebies as a complementary product along with the purchase of another product. This will help filter in the customer that intends to buy from you, and incentivise them to make the purchase while filtering out those with low purchase intent.

Alternatively, keep an eye out for what you can get from the customer in exchange for a freebie, if not money. Getting a customer to sign up, or share their email may be a good idea since it builds your database. You could use it for remarketing to the customer and eventually make a net-gain on your freebie.

Just like planning is required for rolling out freebies and contests, it is also vital that you have a plan in place for ending the program. It should be consistent and should only be stopped only once the customer is satisfied. For instance, if your freebie is a free sample of a new product, requesting customer feedback may be a good way to signal the end of the program. This also creates a feeling that you care about the customer, and perhaps even get them invested in your product. 

Additional resources: 

7. Not building a team

Many entrepreneurs believe in doing it alone. This means shouldering all the responsibilities of managing a business on their own.

In economics, there is a concept known as “opportunity cost”. Essentially, when you choose to pursue any one opportunity, the “cost” to you is that your time is no longer free for other opportunities. So the cost of one opportunity is actually every other opportunity you have.

If you are bootstrapping your own business, chances are you did everything yourself. You set up the website, you tinkered with it, you uploaded products, you wrote all the product descriptions, you did all the marketing. A spectacular one-person show.

The problem here is that while doing everything yourself is great, it’s also incredibly time-consuming. This is time you could be using elsewhere—spending it with your family, cooking up new ideas, building business relationships, or building overall systems and processes, just to name a few.

Menial tasks come in two varieties: necessary and unnecessary.

You want to try and automate as many necessary menial tasks as possible. This process will cost a bit of money, but the headache and heartache you save in the long term typically outweigh the money you’ll spend. Besides, you can often find people who will gladly do these tasks (inventory uploading, data entry, etc.) for you for a reasonable sum.

Unnecessary menial tasks have to go on the chopping block. For example,  spending too much time tinkering with your site’s logo, fiddling with image sizes, going into unnecessary detail about the colour of a button, or some other minor change that probably you alone have noticed – may not be the most valuable utilisation of your time.

Micromanaging employees can be a bane for your venture. It is a sign that you do not trust your employees and have the need to look over their shoulder. Although it might be because you are a perfectionist and want things your way, it can limit the ideas and process improvements that you can potentially achieve through your team.   Your team building efforts will be lacking if you fail to provide a clear strategy and convince your team of your novel mission. The team needs to know the cause and the passion that drives you in order to drive themselves to amplify it. 

Be mindful of the following while building a team. Are you paying enough attention to giving feedback? Do you take time out to discuss the work done by your team with them? If not, this could affect your foundation. Giving feedback is not just to improve the quality of work or facilitate corrections. It is essential for fostering a culture of collaboration. 

In order to get your team all set on goals, you could always engage in participative goal setting. The process involves designing attainable goal-setting exercises for the team members and helping them prioritise tasks that are critical to the company. This way the employees can help participate in running the company.  This will empower the employees and will help you build a team that is actively involved in progressing towards the vision of your company. 

Some of the things mentioned above can have a positive effect on your conversions. But you’ll only know once you have a lot of visitors and sales to compare it to. 

In the early stages of your business, you may want to take on the burden of doing the menial tasks all by yourself. After two hours of tinkering, you’ll feel like you did a lot of work, but realistically, your time could have been better spent elsewhere. So, at some stage, you must be able to delegate.

A business decision you’ll have to make is if you need to hire help. This could be a co-founder, a freelancer, or even a part-time or full-time employee to get tasks done and help you grow your business. When it comes to deciding what to delegate, you can sort the tasks at hand intelligently in the following way:

      • Time-sensitive and time-consuming: You have a deadline looming on your head and the task takes up a lot of time- this is your cue to delegate and distribute the workload.
      • Teachable: If you are good at it and you are confident that the skills and tricks are teachable, again, look at hiring people and impart the learning and responsibility.
      • Admin and Approvals: Why should you put many hours a day into reviewing and approving routine administrative documents when you can put those hours into more productive work? Hire a person for the same and get it done faster. 

Remember, effective delegation does not require you to nitpick those delegated tasks. Get clarity on the two T’s - Task and Time taken.  

Additional resources: 

8. Not knowing your target audience

Doing quality research comes in two parts: finding product ideas and knowing your customers. The tricky thing here is that you can have customers and then build a product, but it’s very difficult to have a product and then hunt for customers.

Most of the conventional wisdom asks you to look at numbers and analytics when researching a niche, and that’s absolutely necessary. But another critical step most entrepreneurs miss is finding an ideal customer and building a customer profile.

Even if your niche has sufficient demand and a good selection of products, without knowing your ideal customer, it will be a lot harder to sell. 

If you dig deep enough, you will find that niches have niches within them. The more finely you can target, the better since it will be easier to identify with your customers’ specific needs.

No matter how many customers you have, each is an individual. The day you start thinking of them as this amorphous ‘collection’ and stop thinking of them as people is the day you start going out of business.

- Dharmesh Shah, Co-Founder of HubSpot

Understanding your target audience is useful in both product development and marketing. The resource linked below will help you dig deeper.

Additional resources:

9. Not having a solid marketing plan

“Fail to plan, plan to fail,” or so the saying goes.

When you set up an ecommerce website, and you know who your customers are and where you can find them, setting up your marketing plan should be easy. 

The truth is, marketers with a documented strategy are 313% more likely to report success. 

While every ecommerce business should have a well-rounded marketing plan that covers all bases, some channels will obviously be more effective than others. Some businesses will do better with pay-per-click (PPC) advertising, while some will shine with SEO or social media. Email is a steady marketing channel, too.

Whatever your plan is, make sure it is in place from the time you launch. New opportunities will naturally arise, but your foundation, if strong, will allow for steady and scalable growth. 

Foundational thinking in your marketing plan needs to be revised from time to time. Getting a SWOT analysis done at intervals would be a good idea.

It is also imperative to continuously test and measure the results of your marketing. Check under the hood. Test, tweak, iterate and fine-tune your marketing efforts towards the most optimal strategy. Any discrepancies in the set standards and the performance should be assessed and redeemed. 

Additional resources:

10. Not securing intellectual property

Intellectual property is the right you have to anything created as a result of your original idea. 

Your business may have intellectual property (IP) you’ll want to protect from competitors. This includes copyrights, trademarks, patents, and trade secrets—in addition to business property such as equipment. If your IP is stolen (infringed upon), national and international regulations can be used to take your case to court and defend your IP.

In order to legally secure IPR in India, you need to mandatorily register with the Trademark Registry, which is the operational body that executes everything under trademarks and patents. It is pertinent to file for your trademark or patent soon, as the first to apply will win the rights in case of similar applications.

Additional resources:

11. Not having a sustainable growth plan

While it’s great to sell your products and services to make a profit month on month today, it is important to keep an eye on the long term. After you realise the profit today, how are you going to turn it into scope for growth? Perhaps, you could understand the customer’s choice better and launch a product extension. You could hop on a new trend by integrating it into your existing product portfolio. Maybe you can reach other markets by partnering with other channel members. 

The growth opportunities are business-specific. You as an entrepreneur can gather all the data you can get – customer insights, market data, competitor analysis and changing trends – to strategise a sustainable venture. 

Tools like industry analysis and customer behaviour analysis (external) in conjunction with financial and budgetary analysis (internal) would be the right place to start your long term growth planning. 

For example, what started as an offline business can further use online channels to provide an omnichannel experience for the customers. There is no specific hard-set boundary between online and offline that holds you back from making a transition. In fact such a transition may be necessary for such a business to be able to grow sustainably well into the future. 

Keep an eye out for the changing trends and innovations in your niche, the evolution of new marketing channels and production technologies, the emerging regulatory landscape in your domain. All of these and more will factor into your assessment of the growth and sustainability of your business in the long run.

Additional resources:

12. Not setting goals right

It is important that you always set clear goals which are driven by the criticality of the task. Most often entrepreneurs do set goals but they fall short in achieving them. This could either be an issue that demands process improvement or simply because you are not setting the right goals. If you are not achieving set goals on a regular basis, it has a huge impact on your deliverables, your team and the culture you are striving to build.  Let us look at how to set your goals right in the first place before setting up processes to achieve them. 

Now, what is the right way to set goals? 

Here is a handy tool that you can use while setting goals: SMART Goals. SMART is the acronym for:

1. Specific: The goal your set should always address the ‘Wh’ questions pertaining to it. If you find the answers to these, you have specific pointers to focus your efforts at and deem if the goal is attainable or not.

  • What is the goal?
  • Why are you doing it?
  • Who is involved in it?
  • Where is it located?
  • Which are the resources you can use to achieve it/ Which are the resources available for you?

2. Measurable: As you set the goal, always check if the goal can be measured and how you are going to measure it. It helps track your progress, stay on course and assess your efforts later. 

3. Achievable: The goal should be realistic and attainable. You cannot set a goal which is impossible and breaks your motivation. While it is important to stretch your limits and set challenging goals, it cannot be by completely ignoring your constraints. 

4. Relevant: Make sure that the goal you are setting out to achieve is worth the effort and time you put in. Ask yourself these questions; Does it align with my business goals? Is it the right time for this? And how is it going to add value to my business?

5. Time-bound: Here is where you strictly define long term and short term goals and further fix a deadline after considering all the above-mentioned factors. If you set a goal that is not time-bound, chances are that you are not motivated enough to achieve it. Procrastination is inevitable and it will remain in your to-do list. For a long term goal, divide it into actionable bits and create a timeline to achieve it.

There are other frameworks available for you to strategically set goals. Objectives & Key Results (OKR) originated in Intel and has been adopted by other tech giants. You can also consider other frameworks like Goal Pyramid and BHAG- Big Hairy Audacious Goals. 

If you are considering any frameworks, you should be aware of commonly used business metrics or Key Performance Indicators (KPI’S). These enable you to assess and monitor performance and goals. On an overall scale, Sales revenue, Net profit margin, Lead conversion rate, Website traffic are some of the many that you need to keep in mind. 

For example; you are considering OKR’s as a framework and assess the digital marketing effort of your firm, the metric you need to look out for will be your website traffic and conversion rates. And your OKR goal would be framed something like this:


Drive more sales of Product A in a month.

Key Results:

  • Increase website traffic from 5000 to 10000 visitors.
  • Boost visitor to purchase conversion rate from 5% to 10%.

Additional resources: 

13. Not networking enough 

Starting a business can often be a lonely pursuit. However, not letting yourself grow with your business can be a mistake. Your business itself is a social entity. You are the individual leading this entity and not networking enough can cost you dearly. 

Let’s face it, no one starts a business already possessing all the skills required. There are always skills, techniques, approaches, tools, and most importantly, perspectives that you can learn to develop your business. Networking is one avenue where you can extend and develop all of these. The avenue, when harnessed right, can get you potential collaborators, employees, clients, partners and even investors. If you publicise your vision and inspire one person, it is a granted word-of-mouth marketing for your venture. It can trigger many first purchases and cultivate awareness about the business. 

However, it is essential that you find the right network for the venture. There are multiple online avenues where you can find other people who share your interests. You can also start a page or community through your business and attract an audience. The next step would be to conduct discussions and conversations that would make them active participants. 

Attend in-person or online events where brainstorming and networking potential are visible. For example; a trade forum or an entrepreneurship seminar. Always make it a point to be prepared and ask good questions. The more you open up to your community, the more perceptive you will become to their needs and problems.  Especially, keep an active lookout for events that are happening in your industry. The industry pioneers can be your potential mentors who would provide you with at least valuable feedback, and sometimes a lot more. 

Additional resources: 

Starting a successful business from scratch

With all those mistakes laid out, you might be wondering: How do I know when I’m on the right track? No one can predict the future for you, but to help in some small way, here’s a shortlist of the hard but worthwhile work you should do to successfully launch and run an online business:

  • Write a business plan.
  • Research your niche: is there demand?
  • Know your customers: who exactly are you solving a problem for?
  • Find a gap in the market: is there some value you can add, or are you just a me-too store?
  • Have a marketing plan in place and leverage organic marketing.
  • Avoid wasting time with menial work.
  • Build a team.
  • Secure your intellectual property.
  • Plan for sustainable growth.
  • Set goals right.
  • Get networking.

And last, but certainly not least: persevere!

Truth is, even as your business grows and succeeds, the mistakes don’t stop coming. What changes is how you overcome them. We learn just as much from our mistakes as we do our successes. 

By understanding these common business mistakes in the first place, you are well on your way to overcoming any challenges that confront your business.

Small business mistakes FAQs

Why are mistakes good in business?

An MRI study published in Nature Communications found that making a mistake can feel good if you give your brain a chance to learn from it. The same concept applies to business. Mistakes provide the wisdom and experience you would otherwise miss out on. Mistakes help you learn that business isn’t perfect, and they are a necessary part of the growth process. So, the mistakes that are good in business are the ones that you learn from, with minimum damage done.

What are common mistakes in business?

The most common mistakes are listed below:

  • Not writing a business plan
  • Not focusing on cash flow and profits
  • Not assessing your business idea
  • Adapting without evolving
  • Not investing in organic marketing
  • Not thinking freebies and contests through
  • Not hiring help
  • Not knowing your target audience
  • Not having a solid marketing plan
  • Not securing intellectual property
  • Not having a sustainable business plan
  • Not networking
  • Not setting goals right

To understand these in greater detail check out: Learning from the past: 13 common mistakes to avoid when starting a business

What are the common mistakes that first-time entrepreneurs must avoid?

As a first-time entrepreneur, one is passionate and fired up about their business idea. Here are some of the common mistakes that all first-time entrepreneurs must avoid:

  • Not writing a business plan.
  • Not focusing on cash flow and profits.
  • Not monitoring progress and adjusting the plans and projections.
  • Buying assets with cash flow instead of taking a business loan.
  • Setting the price based solely on competition.
  • Not filing for proper business structure and business registration.
  • Not researching enough.
  • Not networking enough.
  • Not building a team.

These are just a few. There will always be mistakes, but the important thing is to learn from them while ensuring that no mistake is bad enough to kill your business.

What are the common mistakes that first-time entrepreneurs must avoid?

There are plenty of mistakes small businesses make ranging from not focusing on cash flow, to not hiring the right people and more. However, to distil it down to the single biggest mistake, it would have to be:

Not creating a business plan

A business plan is the most comprehensive document about a business that not only gives it a mission but also charts out a roadmap to achieve it. It is the blueprint against which every business decision an entrepreneur makes can be assessed and measured. Writing a business plan helps entrepreneurs avoid a number of pitfalls on the long journey towards success.

Don’t know where to begin? Use this free business plan template to get started.

Do you want to create your own online store?