Want to learn how to recognize and avoid many of the mistakes commonly made by small business owners? Find out what they are and how to stay on the right track in this exclusive expert Q & A interview with Sylvia Browder, Project Director with the Women’s Business Center in Mobile, AL and author of Sylvia Browder’s Blog for Women Entrepreneurs.

Q: What are the most common mistakes that new business owners make regarding funding and how can they be avoided?

1. Launching without a business plan – Launching a new business without a business plan is like driving a car without tires.  A business plan is an important blue print which helps define the course of action for a new business startup.  So, to avoid possibly failing, I highly recommend that clients take the time to create a detailed, well-written business plan to map out mission, goals, financials and more. 

2. Developing a poor marketing plan – To spend marketing dollars on one particular type of marketing medium, can be potentially devastating for a new business owner.   In my few years as a business consultant, I’ve had clients who have come to me after a failed marketing strategy, and realizing that they are in danger of losing their business.  Some have spent their entire marketing budgets on one particular campaign such as, expensive magazine advertising, radio spots or local television commercials, without identifying if this was where to find their target market.  Others had poor marketing campaigns that failed to connect with the wants and desires of their customers. As a business consultant, I help small businesses alleviate this problem by helping them define their target market and create marketing campaigns that help them in their marketing and growth efforts.

3. Undercapitalizing your business – Many small businesses have all the ingredients it takes to be successful, but poor financial planning can sink a business very quickly.  Cash flow is important to start-up businesses.  Business owners should know what resources are available for them so they are prepared when the need arise.  Such external support includes venture capitalists, financial advisors, factoring services or accountants.  Also, small business owners should position themselves to be prepared to apply for funding when the need arise.  So, this includes having a good credit score and a professional business plan.

4. Poor budgeting habits – A budget should be done as a part of the business plan.  If you have no business plan, chances are, you don’t have a budget either.  Your bills are piling up, forty-five day aging receivables, and you are robbing Peter to pay Paul.  Unfortunately, there is no sense of overall profitability or predictability of the future.  One of the resources that I suggest to business owners who are having a difficult time budgeting is to seek the assistance of agencies such as Consumer Credit Counseling Services who offer help in creating a personal and business budget.