Entering into Partnerships without Clearly Defined Roles
This small business mistake is part of a collection excerpted from Gary Schine's book 101 Small Business Mistakes
Starting a Business for Reasons Other than Market Demand
Under our economic system people are free to start any kind of business they like. Unfortunately, would-be customers are also free to buy or not buy what they please. Too many people start businesses solely because they want to spend their time making quilts, designing tableware, or writing software. There is nothing wrong with any of these activities. The point is that you need to make sure there is a market for your product or service and that you have a reasonable chance of serving that market profitably.
There certainly are people who started successful businesses based upon their hobbies. However, a closer examination almost invariably reveals that they structured their service or product offering to meet a clear marketplace need. A quilt-maker client of mine wanted to make quilts and sell them. However, she looked into the marketplace to discover that quilts of equivalent quality to her own were selling for prices that would translate into a wage for her of about $.60 per hour if she were to sell her wares at competitive prices. She continued studying the marketplace and discovered a niche for herself-- producing quilts for nonprofit corporations that use the quilts for fundraising. She is operating successfully today.
Another client of mine in the same field insisted on opening a quilting supply retail store. At my insistence she did some research and found the market to be less than booming for quilting supplies in this area. She decided to proceed anyway in pursuit of her dream. The dream turned into a nightmare. She is currently trying to stay out of bankruptcy.
There is nothing wrong with starting a business based on doing what you want to do as long as there is a market for your product or service. Be sure that you can direct that product or service towards a clear market need. If you can't find a market need that you can fulfill, my best advice is that you don't proceed with the venture.
Other Business Mistakes and Misconcetions
- Failure to Prepare a Business Plan
- Myth-- A New Business Must be Based upon Uniqueness
- Overspending
- Momentum
- Starting a Business for Reasons other than Market Demand
- Entering into Partnerships without Clearly Defined Roles
- Not Putting Partnership Agreements into Writing
- Organizing A Small Company as a Large Company
- Misconception-- A Product Can Be So Good, It will Sell Itself
- Not Understanding Your Product's Benefits
- Believing That Experts Have Magic Answers
- Not Pricing Based on Benefits to Buyer
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