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SALT LAKE CITY -- The number of self-employed people across America is declining. Small-business counselors say there are always opportunities for people who want to open a small business, but there are some common mistakes a lot of people make.
Even if someone has an idea for the next big thing, or a new product that no one will be able to live without, or a service that outshines any other, a lack of planning will turn this great idea in a colossal failure.
If you can't maintain it, can't distribute it and can't meet the regulatory requirements from it, you're not going to stay in business.
Small Business Administration Utah District Deputy Director Steve Price said, "You could take the pie [maker] and say, ‘You might have the greatest pie. But if you can't maintain it, can't distribute it and can't meet the regulatory requirements from it, you're not going to stay in business.'"
Price says there are a lot of things that could go wrong before a business owner even opens his doors. Here are some common mistakes.
Have a business plan
It seems so basic, but Price says so many people try to open a business without any kind of planning.
"We talk about a business plan being at least a year in advance," he said. "I would recommend two, three or five even, if it's possible."
This plan should include the costs of things like maintenance, taxation, distribution and operations. Price says, when people first look into opening a small business, they don't realize how many hours they will have to work every day.
Plus, people who plan on running the company completely by themselves hardly ever plan for things like vacations or sick days, which could eat into the bottom line. Price says self-employed people need to plan for those things, too.
Know your competitors
A lot of people, when they have a business idea, may think they already have a corner on the market. Price says these potential employers tell themselves, "No one has this," or "I would have no competition." But Price says there's really no such thing as a viable company without competition.
Maybe there are no competitors because it's really not that important to people. That's why nobody has done it.
"Maybe there are no competitors because it's really not that important to people," he said. "That's why nobody has done it. It doesn't mean you've got an exclusive market that everybody is going to want to be involved with."
Not all products or service ideas are good ones. People who have seen the ABC show "Shark Tank" or the network's earlier reality show "American Inventor" knows this concept is true. Remember the Perfect Pet Petter, which was a robotic arm that would pet your dog for you while you were away? Or remember the Bladder Buddy, which acted like a body-sized drape that would cover you if you needed to go to the bathroom in public? These inventions didn't exactly catch on, did they?
Price says you need to determine if there is even a market for your product. If someone failed at building a company similar to the one you're trying to start, it may be helpful to find out why that person failed.
Plan for success
Let's say your business does take off. Great. What if it becomes more popular than you expected? Are you ready for that? Price says the entire dynamic of the business plan will change if your orders double.
"Whether it's double or half, do you have a plan? Many times, they don't," he pointed out.
Have an exit strategy when things go bad
Many start-ups are funded with either the life savings of the owner or a small business loan. Either way, Price says many company owners are fully devoted to the business and accept the idea that either the business will be a success or they will lose everything trying to keep it afloat. Price says it pays to have a plan in motion just in case the company doesn't succeed.
Price says a lot of people overlook this one detail, or if they do think of it at all, it's normally the weakest part of their plan. But a good marketing campaign is crucial to get the word out about your new company.