Small businesses are the lifeline of several entrepreneurs. They are a decent way to make a living and a ladder to greater business success.

Contrary to what many people believe, starting and running a successful small business is not easy. In the US 50% of small businesses fail in the first year, and 95% do not last 5 years, from statistics by the Small Business Administration (SBA).

There are several essential business skills you must learn before going into business to avoid failure. Here is a list of the top five mistakes that small businesses make.
Top 5 Biggest mistakes small businesses make

Inadequate capital

It is common to underestimate the value of a small business. In addition to limited startup capital, entrepreneurs also overlook some unforeseen expenses.

Even with a proper business plan, budget management is a significant huddle with insufficient funds. While starting and running a business, it’s best to look ahead and anticipate expenditures and be well funded.

Early drawing of profits

Small business owners usually have their business as their sole source of income. This means that even in the early stages profits are drawn from the business to sustain the owner and dependents.

It is not wrong to draw funds from a business, after all, that’s its purpose. But starting to draw funds early is a business killer. Early profits will serve better if injected back into the business for growth and financial stability.

Working alone

Small business startups are usually a one-man-show. But as they grow and business activities increase there is the inevitable need to hire labor. Some business owners don’t understand this and prefer to handle everyday business roles by themselves.

The job may become overwhelming. Leading to unfulfilled requests, delays, and unsatisfied customers. Increasing the labor force and dividing roles improves operational efficiency.

Friends for partners and employees

While working alone maybe overwhelming, having friends as partners and employees is a bad idea. It’s one of the oldest phrases in business “There is no friendship in business”.

Working with friends becomes a problem when it comes to formal communication, accountability, and leniency. Friends cannot be handled like other employees, and that leads to split partners or a failed business.

small business mistakes

Choosing the wrong investor

Small business owners mostly welcome the idea of an investor. To grow and expand their business or to reach a certain market or purely just for the extra funds. Investors do raise the status of a business, but only if it’s the right investor. The right investor needs to understand the business and what it needs to grow.

And not only that, the investor needs to be flexible to ideas and easy to communicate within a business relationship. Choosing the wrong investor takes the business on a downward path.

Running a small business can be the gateway to significant business success. It has been said a lot that most of the leading business firms started small, but it’s true. It’s not easy running a business; sometimes it’s a milestone to breakeven.


There are lots of dos and don’ts. Avoiding one way to do it wrong counts as one way to do it right. And these little things all add up.