1) Overspending on startup costs: Paying a fortune for an elaborate website when your business has nothing to do with the internet? Over-decorating your place of business when basic, no-frills ambiance would serve just as well? Renting a large space for a lot of money when you are unlikely to need it all? Spending way more on advertising than is likely to ever result in sales? These are all big mistakes small business owners make up front, and even if they can afford the initial "hit", it gives them little room for error down the road, and greatly increases the chance of failure.
2) Letting ego get in the way: Do you see your customers as doing you a favor by patronizing your business, or are you doing them a favor by providing your services? If it's the latter, there's a high chance your business will fail. If you are gruff, inflexible, and untrusting of your customers, they won't come back. Remember the Subway franchise owner who told me I could only have my tomato in the sandwich, and not on the side? That's letting your ego get in the way.
3) Pinching short-term pennies: It's tempting to buy low-quality food or materials, refusing to give complimentary meals/services when you or your employees screw up, and to skimp on otherwise inexpensive items that will just annoy your customers. (For example, I know a McDonald's franchise owner who only lets people have just 2 ketchup packets per food item ordered!) Like the ego situation, this will drive people away, and you will be left wondering where all of your customers went. While cutting waste is always important in any business, skimping in essential areas will kill you.
4) Not hiring or empowering competent managers: Unless you are actively running your business every day, you will need to hire managers to do the job for you. These managers need to be ego-free, and capable of handling requests and issues that are outside the box. It is tempting to hire inexperienced or unintelligent managers and pay them very little, but your business will suffer royally when they fail to rise to the everyday challenges of dealing with customers and their complaints/issues. You need to have faith that your managers can handle everything as well as you can. Otherwise, you are letting someone else destroy your business.
5) Blaming the customer for your own failures: This goes along with the "ego" item in #2, but is a bit more specific. Basically, if a customer is complaining about something, and you know he's right, you should blame yourself (or your employees) and not the customer for raising the issue. I'll give an example. About 10 years ago, my then-girlfriend and I tried a new breakfast place. They messed up her order really badly. She returned it, and the replacement order was also flubbed badly. The owner was present, who apologized, made sure it was made right, and gave us a free meal certificate for next time as compensation for the trouble. So far, so good, right? Except when we came back, AGAIN they messed up the order badly. The owner came out, and instead of profusely apologizing for this occurring the second visit in a row, he decided he was simply done with us as customers. "I can't offer you guys anything again," he said. "It just seems like it's not working out for you as customers here." He fully admitted that his kitchen staff was botching the orders and that none of this was our fault, but he simply didn't want us as customers because our meals were screwed up in both of our visits, and we were unhappy about it. Not surprisingly, the place closed about a year later.
6) Over-couponing: Some businesses think they are clever by jacking up their base prices, and then regularly offering coupons in local magazines to bring the price back down for value-minded patrons. They think this is brilliant because the Jewish people like me feel like they're getting money off, while the non-frugal customers are paying more than they otherwise would. Unfortunately, this model only works if you make coupons readily and easily available at all times. Otherwise, you train your regular customers to simply avoid your business (especially if it's something non-essential, like a restaurant) if you don't have a coupon out, or if they can't find one. It's best to keep coupons fairly infrequent and more promotional, and to just lower your base prices to something more reasonable.
7) Anal-retentive coupon policies: The point of offering coupons is to attract new business and encourage repeat business. It is NOT to make people get into your doors by an arbitrary date, or to force them to exercise their printer. Unless it's some kind of special promotion, you are a fool to refuse to accept coupons that expired last week. Unless you have a real problem with your cashier falsely claiming coupons were used and pocketing the difference, you should accept a cell phone display of a coupon just as well as a printed-out coupon. Basically, use common sense, rather than being a pointless stickler for rules. If someone brings in a $2 off coupon that expired 3 days ago, let them use it, and make sure your managers understand the same. Otherwise you're just pissing people off and actually shooting yourself in the foot by offering these coupons in the first place.
8) Overpricing: It's hard to succeed with a small business, especially with a limited customer base. Often times, business owners attempt to make up for this by raising their prices to ridiculously high levels. While you will always find your share of stupid consumers who will pay too much, you will eventually lose most customers (or fail to get them in the first place) if your prices are too high. Often times, small business owners believe that their service is special or of such high quality that their high prices are justified. Usually that is delusion, and even if true, the customers won't realize or appreciate it. While charging too little can also hurt a business (for obvious reasons), charging too much can be even worse.
9) Overhiring: Sometimes you only need 3 employees to get the job done, but you're hiring 10. That's not going to work. If you have employees that spend a lot of time standing around and not having any work to do, you have probably hired too many people.
10) Poor choice of location: What can appear to be a great location can actually be a disasterous one. Are you on a major street with lots of traffic? You might think that's a great location for a business, but not if that street is primarily used for commuting rather than locals traveling within the immediate area. Perhaps you think you've found a great location for your burger place, neglecting the fact that a highly successful chain burger place is 1 block away. Maybe you're selling merchandise aimed at people 50 and over, in a town where most residents are young. Maybe you're trying to sell high-end stuff in what appears to be a wealthy neighborhood, but is in reality a place where people are house-rich but cash-poor. Maybe you just opened up in a place where parking is such a pain in the ass that they don't feel like coming to you. Always do research about the location of your business. Figure out why the previous businesses in your spot are no longer there. For example, if you are opening a restaurant in a spot where 3 other restaurants have failed in the last 8 years, you are almost surely going to fail, as well.
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Originally Posted by verminaard
