Common small business mistakes to avoid

Making mistakes and learning from it are all part of life. But when you’re running a small business, a mistake can be costly.

This is one of the reasons that more than 60 per cent of small businesses in Australia close within their first three years, according to a report by Inside Small Business.

Often, small business owners have resigned from a job to pursue their dream of small business ownership. But it can be more difficult than they thought, and mistakes happen.

Here are five common mistakes small business owners tend to make early on that you can try an avoid in your business.

Not setting up to scale

Growing pains are inevitable in small business. Starting out with the right back-end structures that can accommodate business growth is paramount. For example, looking for ways to automate processes wherever possible so lighten the workload.

Sydney’s Dean Salakas took over the family business with his brother in 2007, online party store The Party People.

“We managed to achieve 300 per cent growth which was great, but the business was never set up to do these sorts of volumes.

“We found ourselves working 18-hour days and sleeping six hours in the store a night before starting again the next day,” Salakas admits.

What I learned: “We did this for four months before stepping back, turning off our website to stop the volume, and rebuilding our systems and processes so we could get back to growing again,” Salakas says.

Growing too quickly

Landing export deals sounds like a dream for small business owners. But the investment can be huge.

Catherine Cervasio is the founder of natural skincare brand Aromababy. She admits that investing in export markets adds up. Trademarks and other intellectual property costs can blow out. Then there’s trade shows, marketing and freight costs, she says.

“We also invested in carrying more of one item, believing it would be in greater demand. But in China, consumers fell in love with our barrier balm, not the bath gel like we expected.”

What I learned: That it’s OK to make mistakes, but it’s critical to learn from them so they’re not repeated. “There’s always a lesson, which provides an opportunity to improve processes or planning for the future,” Cervasio says.

Not adapting to market changes

In theory, small businesses are agile and can adapt to market changes far quicker than large corporations. But sometimes, they miss the boat.

Sofa Brands founder Steve Layton admits he didn’t adapt to changes in the ecommerce space quick enough, meaning he missed out on sales that went to his competitors.

Layton says: “I knew ecommerce would bring about change, but I simply didn’t think that online retail - particularly in the furniture industry - would gain traction as quickly as it has. It changed the business in a matter of months, not years.”

What I learned: The experience taught him to make sure you surround yourself with people who understand the new business paradigm. “We learned that you need to take back control of your business and your brand, and in some cases, take a few steps backwards to actually move forwards in the long term.

Inventory failures

Ordering too much of a slow-moving product and being stuck with it can be an expensive mistake in those early days of running a business.

Brisbane’s Daniel Brady runs online store Heavenly Hammocks & Swings, and he’s been there. Costs can really blow out when you take into account the costs associated with having to warehouse excess stock, he says.

On the other hand, running out of a popular product too soon can also cause headaches.

Dealing with customers who have paid for the product and having to apologise while restocking popular items can be stressful.

What I learned: Now, Brady makes quick decisions on slow-moving products that aren’t going to be restocked and discounts to reduce stock levels over time. He’s also implemented speedy customer service processes for when things go wrong.

Receiving faulty stock

Problems when items that are manufactured overseas is common. Not to mention costly.

Heavenly Hammocks & Swings’ Brady admits that he once had to dump thousands of dollars’ worth of faulty stock.

He’s also had to act fast to resolve the issue with customers. “We try to reply to their problem within hours and have a replacement on the way the next day.”

What I learned: Brady now keeps a record of manufacturer fault rates and acts accordingly, such as deciding whether the supplier signals its intention to improve, then decides whether to re-stock the item.