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The 5 Most Dangerous Small Business Pitfalls (And How To Avoid Them)

Alisha Shibli
May 6, 2020

Running a small business doesn't come with a guarantee of success. In fact, it usually comes with plenty of risks that may lead to failure. Do you know 70 percent of small businesses fail within 10 years from the date of incorporation?


The current situation is worse because of the COVID-19 outbreak. The market is bearish and therefore, even the slightest blunder can prove fatal for your business. Taking precautions should be a priority for you right now.


That said, there are plenty of tried-and-tested strategies that you can implement today to avoid the most common small business disasters, rise above the competition, and venture successfully into your 11th year of operations.


Here are the five most common pitfalls and how to protect your company against the problems you might be facing right now or may face in the future.


Pitfall #1: Not keeping up with the changing trends


It's easy to underestimate the speed with which technology is changing these days. This is making it slightly challenging for businesses to keep up with the trends in business software and digital marketing.


Your small business may have had some success with paper-based contact management systems in the past, for example. Still, every successful business these days is at least somewhat proficient with a digital CRM. This isn't to say that old-school marketing efforts like direct mail are dead, but the reality is that they probably aren't going to give you the same advantage that they once did.


More than 80 percent of purchase decisions today start with an online search, and those prospective customers that don't begin their decision-making process with a search are probably starting with social media instead. If your business doesn't have a robust digital presence, then you may lose the majority of the market share to somebody active on social media.


The good news, however, is that you don't have to master these platforms. As long as you know how to hire the right marketing agency or bring digital expertise in-house, then it's not too late to make the transition.


You definitely need to understand the basics of areas such as search engine optimization (SEO) and Facebook marketing so that you can evaluate the professionals that you are thinking about delegating these tasks to. What you don't need to do, however, is to spend your time mastering the minutiae.


Whoever you choose to hire, ensure that they have great credentials and technical know-how that they can bring to the table. An experienced digital marketing expert will have:


  • A proven track record: Have they worked with companies in your industry before? Find out if they can provide detailed references and point you to satisfied customers.
  • A good overall business sense: Stay away from marketers who don't understand how advertising fits into the big picture of your business. Gravitate towards people who understand the big picture of what you need your marketing objectives to accomplish.
  • Some form of third-party verification: If you are hiring a facebook advertising expert, for example, then this person should have at least passed the Facebook Blueprint Certification to demonstrate their proficiency.


Pitfall #2: Growing your business faster than your infrastructure can support

For your company to succeed over the long-term, growth must be built upon a solid foundation, fueled by quality infrastructure and resources. When you're sitting down to map out your expansion plans, you'll want to make sure that you overestimate the capital and human resources that you think will be required. Nothing can be more frustrating than watching an opportunity for growth pass you by because you were caught unprepared.


A growth-friendly business infrastructure will have:


  • Adequate capital reserves: New revenue sources often come with unforeseen expenses, so rapid growth can quickly take on a life of its own. Finance your growth before it starts happening to avoid this common pitfall.
  • A team that is capable of learning new things: Achieving business growth is all about adapting to new landscapes, so make sure that your team is capable of familiarizing themselves with new skills and operating procedures.
  • Information on-demand: Your information systems need to be responsive and reliable. Nothing is more important than having the latest data when the numbers are changing every day.


On a tactical level, you'll want to make sure your business has at least one stable banking relationship that you can leverage to help you expand. Getting to know your banker can provide access to a line of credit that your business can use to finance new projects, hire more personnel, and develop new products.


You'll also want to make sure that your accounting systems are sturdy enough to help you keep the numbers straight as your business continues to expand.


Pitfall #3: Not paying attention to your domain name


One of the key aspects of a website’s success is its domain name. Your website design and promotion strategy—all comes second to choosing the perfect domain name. Consider these aspects that a domain name shadows:


  • Brand Positioning: A good domain name amplifies your branding efforts. It established what your brand is and what it offers. For example, www.booksandpen.store.
  • Marketing Touchpoints: Good domain names can be used as touchpoints that hook your target audience. Consider www.palatialhomes.store. The name gives you a fair idea about what the website might have to offer.
  • First Impression: Your domain name is your first impression and it should impress. Look at www.learntrumpet.fun and you’ll know you’ll be mastering the trumpet on this website.


For something that is at the core of your business should be on a relevant domain extension. To make domain names more brandable and memorable, hundreds of new domain extensions have been made available to fulfill specific purposes. Today there is .TECH for technology, .FUN for fun and entertainment, .PRESS for news and journalism and .STORE for retail and eCommerce stores.


You can give your business a whole new life by getting details such as your domain name right.


Pitfall #4: Trying to serve too many different types of customers


While it's true that you don't usually want to be dependent on one customer, you do want to focus on serving one specific kind of customer to extract maximum revenue. There are hundreds of ways to segment your demographics, so it's important to keep this idea as simple as possible. This is also where having a reliable accounting system comes in.


If you sit down and analyze where your sales are really coming from, you'll likely find that most of your revenue comes from one or two customer profiles. If you're serving other businesses, for example, then you'll probably find that most of your customers are either in the same industry, are of the same size, or have some other defining characteristic that they share.


Here's what the ideal customer profile usually looks like:


  • They have a pressing problem that your product or service can solve: This might sound like an obvious requirement, but many businesses spend their time chasing customers who don't have any real interest in your services. The entire sales cycle is much easier when you make sure that your customer views doing business with you as a priority.
  • They will be able to refer you to other customers: Referrals are an integral part of any business, so the best prospects will be able to recommend your products or services to others.
  • They are likely to come back or retain you: If you are selling a one-time product or service, you'll want to focus on customers that can do repeat business with you. And if it’s a retaining service, you must aim at providing the best every time.


Focus on serving your highest-value customers, even if it looks like it's at the expense of everybody else. By designing your business around those customers who are likely to hand you the most revenue, you're able to really differentiate yourself in the marketplace. Differentiating yourself can result in more recognition, a better reputation, and more market share, so do the research upfront to discover which customers are truly worth pursuing.


Pitfall #5: Hiring the wrong employees


Hiring the right employees can be the difference between achieving rapid growth and getting caught in a downward spiral. The best employees will not only bring a growth mindset to the table, but they will also be reliable and able to think for themselves.

When you're building your small business team, look for people who have:


  • A track record of performance: The best employees will be able to show you examples of previous projects they've completed.
  • The ability to make decisions under stress: It's important to hire people that don't need to be micromanaged, so look for people that operated successfully in stressful environments before.
  • Unquestionable integrity: Hiring a toxic employee can be far worse than hiring nobody at all, so make sure to conduct a thorough background check before and do extensive due diligence.


In conclusion


The small business landscape might be filled with dangerous pitfalls, but there's no reason for your company not to thrive. Keep an eye on the evolving trends, embrace technology, and take examples from other successful – or failed – businesses. With the right combination of intelligence, strategy, and creative teamwork, you can avoid the most common disasters before they have a chance to happen.

Small Business Pitfalls Infographic




Alisha is a Senior Content Marketing & Communication Specialist at Radix, the registry behind some of the most successful new domain extensions, including .STORE and .TECH. You can connect with her on LinkedIn and Twitter.

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