South-Western - Management  
Simple Startup Flubs To Avoid
Topic Entrepreneurship
Key Words Small business, startups
InfoTrac Reference A126500929
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News Story

The startup rate of sole proprietorships has been increasing annually by 2% since 2001. Statistics show that half of those companies won't survive and about 39% won't make it to their sixth year in business. Peri Pakroo, author of the Small Business Startup Kit, says many of these small business missteps can be avoided. She offers the following common startup mistakes and how to learn from them:

  1. Winging It: Owners need to plan where they want their business to be in one, two, and five years. This long-range business plan should be written out before the business is open.
  2. Lack of capital: Most business owners need more money than they think they will to make it past the startup phase and past breakeven. Lack of adequate funds can hurt a business by preventing the owners from hiring top-caliber employees, limiting marketing activities, and reducing purchasing power.
  3. Not knowing a banker: Business owners should find a community bank and forge a close relationship with a banker who has an interest in local economic development. This relationship can be very valuable when the business needs a loan to grow.
  4. No management training: Many business owners are very skilled in their area of expertise but lack the skills to hire and train employees properly. Seek out training online, or at a college or university nearby.
  5. Confusing sales with profit: Pricing too low isn't going to help a business succeed if you're not making a profit on each sale. Shop the competition to price properly, making sure to add in any overhead costs.
  6. Losing track of money: Income and expenses must be tracked every month. Monthly profit and loss statements as well as cash flow statements should be analyzed to look at what you've spent and earned and to project in the future.
  7. Pinching pennies on essential help: A good accountant is essential for advice on book keeping and tax-savings and an attorney can advise on business structure and high-dollar contracts.


The article stresses the importance of having a business plan. Is a business plan the same thing as a strategic plan? Define and list the benefits of each type of plan.


Many start-up businesses run out of money. Name three reasons why this happens.

Source "Simple Startup Flubs To Avoid; With Novices Facing So Many Challenges, Tripping Over Any Of These Seven Common Mistakes Can Be Fatal. Don't Let This Happen to You." Business Week Online, Dec. 27, 2004, pNA.
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