27 Real-Life Small Business Mistakes...and What They Learned

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Twenty-seven ways you can mess up in small business means twenty-seven ways you can learn something and do better the next time. You don't build success on success alone; you build success on one failure after another — if you learn from those failures and move forward. What can you learn from these real-life business mistakes?

1. Depending on a single source.

Scott Newman, president of Massachusetts-based US Markerboard, was depending largely on a single manufacturer for his product. When the manufacturer took on another distributor and wasn't able to meet US Markerboard's product needs, Newman found himself scrambling to find manufacturers, compare products and prices, and fill his orders in the middle of his busiest time of the year.

Lesson Learned: Don't place your business success in the hands of a single manufacturer, distributor, or other source.

2. Not developing supplier relationships soon enough.

Newman regrets not beginning to develop supplier relationships long before his need arose, which would have given him the time to do research, compare prices, negotiate terms, and schedule his orders in time to get them delivered when he needed them.

Lesson Learned: Even if you currently do not need additional supply sources, you should be looking and comparing long before you do. Developing solid relationships takes time, and you don't want to be forced to settle for what's available when the time comes.

3. Missing the obvious.

Sometimes the thing that will make your business a success is so obvious you miss it. That's what happened to Kirk Ward, a retired accountant who wasted time and money on various Internet marketing ideas, none of them successful, before realizing his business was sitting in a box, in the form of all the marketing materials he had created over the course of his accounting career. Ward turned them into a collection of articles, tools, and online classes for accountants, Secrets of Marketing Accounting Services, and started selling what he already knew.

Lesson Learned: The newest, biggest, brightest, shiniest product or idea doesn't necessarily become the best business venture. Much of your value as a future business success is in what you already know. Dig into your own experience and expertise first.

4. Assuming that a professional product will solve all your problems.

Ward's initial success with his marketing-for-accountants website hit a major speed bump when he decided to trade in his "cheaply made custom software" for a professional, packaged, pricier software. Ward's customers started complaining, and Ward found himself losing the business he'd built up and unable to get help from the professional customer service team attached to the software.

Lesson Learned: Don't assume that a professional name, image, or package guarantees a professional performance or a professional, helpful support team. Do your research before you invest in pricier options, get real feedback from real people, and then make your choice based on what you find from that research.

5. Staying with something that's not working.

For small business owners of all stripes, making a big investment in some sort of professional solution, product innovation, or outsourced help can be a real boon. But if it isn't, and the investment isn't worth the return, many small business owners tend to stay with the investment for too long.

Lesson Learned: If you spend money on something that turns out to be a flop, realize it quickly and let it go as fast as you can. You may not be able to recover that investment, but the more time you waste on trying to make something worthless into something worthwhile, the more money you lose in profitability and growth.

6. Not checking your URL.

Since the Internet is so undeniably a part of commerce, grabbing a business URL and setting up a business website is (or should be) an assumed part of any business marketing plan. URLs can come with a history, however, and not always a good one. In the case of Derrith Lambka, CEO of how-to website MarketingZone.com, his URL came with a blacklist notation. The company which had owned the URL before Lambka had gotten blacklisted by Google; it took petitioning to be recognized as a new company, with a significant delay in building website traffic, before MarketingZone.com was cleared and able to start growing.

Lesson Learned: Do your homework on URL purchases before you invest hundreds or thousands of dollars. A formerly blacklisted URL doesn't mean you can't clear it and use it, but far better to know about the problem and start solving it from Day One, while you get a website built and content created, than to figure it out months down the road.

7. Not developing a cohesive marketing plan.

Even experts can miss important business steps. Leslie Truex, author of The Work-At-Home Success Bible, cites her own failure to develop a marketing plan that was more than "a hodgepodge of tactics that I'd throw together when business dropped."

Lesson Learned: Lack of a marketing plan means you'll be scrambling to come up with some method when business gets tight. To succeed, you need to be marketing consistently, building relationships, developing a cohesive brand and image, and laying the foundation for a business that keeps growing from the first day onward.

8. Not marketing on a daily basis.

Truex shares that, "it's easier to maintain a steady stream of business if I include marketing in my daily business activities." Many small business owners make the mistake of marketing only in case of emergency: we're out of funds, we're out of customers, we lost a client, we need cash now. Haphazard marketing will yield only haphazard results.

Lesson Learned: Market your business daily. Even ten or twenty minutes every day, consistently spent on a good marketing strategy, will build into a steady stream of relationships, referrals, and business growth.

9. Assuming that others will do the right thing.

While trust is an important part of business relationships, you shouldn't assume that your employees are trustworthy just because you are. Cyndi Finkle was running a successful business catering for television crews when three of her own employees overheard her say that she had no competition. They promptly, and secretly, formed their own business and began contacting Finkle's clients while still working for Finkle's company. "Since I do the right thing, I always believed that others would do the right thing," says Finkle. "But I learned that not all people have the same work or moral ethic — and that, when given the opportunity, others will lie and steal and cheat."

Lesson Learned: Paranoia won't serve you well, but awareness of the simple truth that greed is a powerful motivation is important. Finkle, now running Art Works studio and classroom, as well as her catering business, puts it this way: "in order to protect yourself, you need to be more careful and less trustworthy — especially of people you do not know directly."

10. Mistaking a business relationship for a personal relationship.

Since small business owners do invest so much personally into their businesses, from home office space to personal finances, in many cases, it's easy for them to invest emotionally in business relationships in the same way they might invest in personal relationships. While business relationships are often as beneficial and long-term as some personal relationships, you can't assume the same level of personal commitment that you would from a family member or close friend.

Lesson Learned: Business relationships can turn into valued personal relationships, but don't mistake one for the other. Invest in your business relationship, but don't depend on them, and don't approach them with the assumption that you share mutual values and goals.

11. Not hiring help soon enough.

Moving from one-man shop to small business with employees is a difficult transition. Hana Johnson, owner of Hair Flairs LLC, notes that, "once you are overwhelmed, overworked, and stretched too thin, then the hiring process becomes burdensome and becomes a chore in itself." Johnson's own experience shows that every new hire leads to new business growth, as she can move from doing the daily, detail work of business to focus on marketing and bringing in new customers.

Lesson Learned: Your ability does not equal your responsibility. Sure, you can do every little thing involved in running your business, but you should be doing the work of the owner, not the work of the $10 an hour employee. Delegating is the best way to help your business grow.

12. Delegating too late.

Waiting until you're overwhelmed, as Johnson mentioned, to get new help or delegate additional work to current employees, means that the process of delegation will be tougher on everyone involved. You'll be stressed out and feeling like you have no time to adequately train your employee, and your employee will feel unnecessary pressure to do a new job without adequate training, time, or help.

Lesson Learned: Develop a plan to delegate from the earliest days of your business, and start training your employee(s) before you hit a crisis point. You can always stay involved in certain tasks or projects as you are able, but the sooner you delegate what you can, the sooner you can focus on your most important work.

13. Not paying attention to your branding.

Sometimes good enough is good enough. Sometimes good enough is bad. Melissa Turner, excited to be able to start marketing her company, Mainstream Services Inc., ordered hundreds of dollars of promotional items without first checking their quality and brand consistency. She ended up with a collection of not-nearly-good-enough items: mismatched colors, missing slogans, and unreadable business cards.

Lesson Learned: "What I leave behind with networking associates and potential clients can wipe out any positive, professional first impression I may think I made," says Turner. "Taking the time upfront to check and double check everything that will present my name, image, logo and slogan is priceless in the end."

14. Assuming that a professional image doesn't matter.

When you're working with minimal funds, it's easy to decide that a professional image is an option. You wait on branding, a logo, custom graphic design, a decent website, right? You've got a good product. People will recognize that...won't they? Not necessarily. The Internet, with all its multimedia options, has made us more image-conscious as consumers, not less.

Lesson Learned: Though it's easy enough to throw together a halfway-decent website, some sort of content, and a collection of semi-related marketing materials (Everything is red! It must be cohesive!), a thrown-together look results in the perception that you are an amateur, and your business itself is thrown together.

15. Using an unnecessary professional service.

A professional image matters, but that doesn't mean that do-it-yourself isn't a valid approach. Depending on your skills, contacts, and past experience, you may be just as capable of professional results as the services you could hire. Joshua Weaver, of PriceFalls.com, found that the huge investment they made in hiring a professional public relations firm was unnecessary. After several months of disappointing results, Weaver and company took their marketing and PR in-house, and were able to save money and make their outreach more targeted, personal, and consistent with the company mission.

Lesson Learned: Getting a professional job done does not necessarily mean hiring a professional service to do it. Don't be afraid to look into all your options. Define the results you want, then decide if the best way to get them is by outsourcing, hiring, or doing it yourself, or some combination.

16. Not doing your research first.

When it comes to areas in which small business owners feel inadequate, they are tempted to simply go with the first option available and hope it all works out. The results can be fine; sometimes in a hit-or-miss situation, you get the hit. But you can miss, too, and it can cost you in terms of time, money, and reputation.

Lesson Learned: If you feel too busy to do the research into your best options, whether for public relations, a new manufacturer, a supplier relationship, product packaging, or hiring, then delegate the work of research to someone else in your business.

17. Failing to look into the future.

Not that you need a crystal ball, but you do need to anticipate customer turnover and continuing profit growth. Ian Aronovich, cofounder of GovernmentAuctions.org, says that their initial revenue model of an annual membership fee failed to consider what would happen when the year was up. Though Aronovich had good success in gaining first-year customers, turnover was high when the time came for customers to renew.

Lesson Learned: "At that time, we were only thinking in the 'now,'" says Aronovich. "We failed to think about how we would attend to customers after the 365 days was up." Focusing on current profit is important, but it must be coupled with a clear plan for future profit as well.

18. Not making it easy on the customers.

Aronovich learned a simple truth that all small business owners must understand: people are lazy. Because customers had to re-enter all their financial information in order to renew their annual membership, many of them simply let the membership expire rather than go through the "work" of renewing it. When Aronovich switched to a revenue model of recurring monthly payments, the company was able to retain current customers as well as gain new ones.

Lesson Learned: Don't make your customers work in order to buy your service or product. It's your job to do the work. Make purchasing, renewing, updating, and upgrading as simple and easy as you possibly can. Don't try to make people less lazy; make the purchase less difficult.

19. Ignoring growth plateaus.

Every small business will go through phases of growth and plateau, at least to some degree. However, it's a deadly mistake to assume that you've simply reached the highest level of growth you can achieve and sit back. "If you're not growing, you're dying," is an adage every business owner should know at gut-level. Growth must continue.

Lesson Learned: Don't let your business die because you assume a growth plateau is normal. When you reach a point of slow or no growth, go back and examine your revenue model, your customer service, your marketing, your everything. Tweak, test, repeat.

20. Letting "small purchases" in discretionary spending go unchecked.

The strange dichotomy of small business finances is this: when you bootstrap your way up, or sweat blood and tears for every penny of capital you raise, you value money and guard it ferociously. Then you start making it, and seeing those profits increase, and believing that you will actually succeed, and suddenly...the ferocious guarding of money turns into a little extra spending, a few too many discretionary purchases.

Lesson Learned: Ed Buchholz of virtual CFO service 60mo says that new businesses, including his own, can unintentionally "hemorrhage funds for unnecessary dinners, travel, and swag when they don't have a clear budget and insight into their spending. The point of having a budget is to avoid waste."

21. Undervaluing your product.

New businesses are especially susceptible to the lure of new customers. You're hungry for business, you're still establishing your costs and timing, and getting that contract matters more than getting an adequate deposit or a decent price. It's a mistake Craig Wolfe, president of Celebriducks, made early on by charging an inadequate deposit for what turned out to be a costly customer relationship.

Lesson Learned: As Wolfe says, "always know that you are never without options." Value your product or service adequately, even if you are desperate for customers; remember that once you set the value, it's difficult to raise it. So set it where it should be, produce something high-quality, market, and don't let temporary desperation push you in a deal that isn't a deal at all.

22. Not spelling out clear terms of contract.

While most small business owners are aware of the need to create appropriate legal documents for their own business structures, they often overlook the need for clearly defined terms when setting up vendor contracts, customer agreements, and even employee descriptions. Lack of clearly defined terms, at best, will lead to confusion for all the people involved; at worst, it can lead to legal liability and significant loss of money and reputation.

Lesson Learned: Get it in writing. Every time. In every situation. You can get many business templates, customize them to your needs, and have a specialized contract, agreement, or letter ready in a short amount of time. All parties involved should read, sign, and date the document, at the least.

23. Going in with the wrong mindset.

For professional speaker Norma T. Hollis, the switch to small business owner was a difficult one because of her background in non-profit work. "You cannot open a business with a non-profit way of viewing the financial world," says Hollis. The entrepreneur's life can require, on any given day, that you be ready to promote your business, win your investors, take calculated risks, think creatively, do your own guerilla marketing, network incessantly, take some downtime, listen to new ideas, let go of old methodology, train new employees, answer customer questions, rethink your entire business strategy. An entrepreneurial mindset is different than most others.

Lesson Learned: Train yourself to break out of thinking like an employee, or assuming that things will be accomplished for you. Cultivate the gift of flexibility. Read the works of entrepreneurs. Be eager to learn.

24. Putting yourself in the wrong position.

Hollis relates her initial attempt in small business, to establish a speakers' bureau, as a mistake. "Right industry, wrong position in the industry. I really didn't know my gifts and talents and that my best skill is sharing my knowledge and helping other people. As a speakers' bureau the main role is marketing — lots and lots of marketing and that's not my strength."

Lesson Learned: Hollis switched from running a speakers' bureau to being a professional speaker, a role which fits her strengths and passions. You'll automatically be more successful at what you're good at and what you love to do. Figure out exactly what that is, and adjust your position in the business as needed.

25. Not knowing or accommodating your best work style.

Some small business owners work best surrounded by people, in high-energy and high-pressure situations. Interaction stimulates their creativity. Others need space, quiet, time. Some work best with a steady daily schedule, others will pull all-nighters to get a project done, crash for a couple of days, and do it all over again. There's no right or wrong style of working; there's just the mistake of trying to make yourself work in a way that, literally, doesn't work for you.

Lesson Learned: Know thyself. You can't make everything just the way you want it, but if you know the factors that help you become most productive, you can build them into your life consciously, and reduce the situations that diminish your productivity.

26. Failing to validate the business model.

Business consultant Michael Zipursky sees a common mistake made in entrepreneurial circles: "The single biggest mistake small business owners make is building without first validating their business model." You get excited about an idea, you ask a few friends what they think, and then you hit the ground running. Mistake.

Lesson Learned: "Small business owners need to ensure that people are willing to pay them real money for whatever it is they are offering," says Zipursky. "Without that validation... a lot of time and money can be wasted."

27. Failing to identify and use competitive advantage.

Competitive advantage is the angle you have which separates you from the competition. It may be unique to your business. It may simply be an advantage that your competitors share but haven't used as an identifying feature. Either way, failing to find a strong competitive advantage and use it in your marketing is a common mistake, and one that can keep you from attracting and retaining customers who see no reason to switch from the competition to you.

Lesson Learned: Zipursky again: "Small business owners need to clearly articulate to their market what makes them different and why they are a better alternative to others offering the same products/services." With a clearly articulated competitive advantage, you're making it easy on customers to choose you rather than your competition.