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6 Mistakes That Can Bring Disaster to Your New Business

07 Aug 2019 7:40 AM | Carrie Casey (Administrator)

Starting and running your own center can be very lucrative and fulfilling. It’s also very challenging. Most small businesses fail, child care centers are no exception.

It's often said that more than half of new businesses fail during the first year. According to the Small Business Association (SBA), this isn't necessarily true. The SBA states that only 30% of new businesses fail during the first two years of being open, 50% during the first five years and 66% during the first 10. The SBA goes on to state that only 25% make it to 15 years or more. However, not all of these businesses need to fail. With the right planning, funding and flexibility, businesses have a better chance of succeeding. We'll go through some of the biggest mistakes that start-ups can make and figure out how to improve your chances of success. It’s necessary to avoid the common pitfalls of small business ownership if you want to experience success.

Most small businesses face considerable financial challenges at first. There’s little room for mistakes in the early days. Ensure that you’re not making avoidable errors. Educate yourself before taking the plunge.

Small business owners can avoid many of the mistakes that lead to disaster:

1)  Failing to listen to customers. Find out why families enroll at your center and why they don’t. Customer feedback is imperative.

  • Too many center owners are so in love with a their particular idea of what makes a great school that they refuse to change to accommodate the market. Your customers are your best source of information. Conduct surveys or ask informal questions. Be flexible and change your approach when the feedback dictates it.

2) Weak leadership.

It isn’t necessary to be Attila the Hun, but your center requires strong leadership. The typical employee in a small program often isn’t considered qualified by larger schools. You’ll frequently be faced with employees with limitations. Your leadership is necessary to drive and inspire them.


3)    Hiring the wrong people. Every center is disgruntled regarding the availability of good help. Even the most popular companies are plagued by hiring mistakes, however, big companies can absorb poor hiring decisions and keep on running.
  •   A small business owner can be severely harmed by a poor hire. Think about the lost time and headaches one bad employee can cause.  I recently recorded a video about some things to think about before hiring. https://youtu.be/S11iutSSAP0
  • If you don’t have a human resources department, you’re on your own, and most centers, of any size are. Take the time to ensure that you’re hiring people that fit with your program so they can be effective in their job. Consider what is needed in the job, what you want in a new hire, and what would be ideal. Look at your requirements and the temperament and background of any potential employees. It’s much easier to avoid a mistake than to fix it.

4)   Undercapitalization. When you barely have enough money to keep your business afloat, any small mishap can disastrous. You’re also forced to do anything you can in the short-term to pay your bills. That’s a poor way to run and grow a business. Ensure you have the funds you need to get your idea off the ground.


5)    Not understanding the importance of marketing. New business owners are often convinced that their idea is so amazing that marketing is secondary. Nothing could be further from the truth. Most businesses need to spend around 15% of their annual revenue on marketing to survive. This amount can drop as the business gains traction.  However, Coca-Cola spends 18.3% of their revenue after 127 years of operations, so your mileage may vary.

  • Centers need a marketing budget. When planning your business, ensure you have the funds necessary to let the world know that you exist.
6)    Failing to recognize your competition. There might not be someone nearby offering Reggio Emilia preschool programs, but not all of your competition is direct. You’re also competing with other childcare of all types, family care (aka grandma), registered family homes, licensed centers, and mother’s day out programs.
  • Consider the other alternatives your customers have for their care. Your customers can always spend their money somewhere else. This is significant.
  •  Make a list of your closest competitors. How can you provide your service in a way that causes customers to favor your business?

Running a center requires a wide range of skills. With so many hats to wear, mistakes are common. It’s not necessary to be perfect, but the biggest mistakes can be avoided. Making a critical mistake can spell the end for your company. Learn about the critical errors business owners make and make plans to avoid them.


If you need help in developing your business plan, contact us at Kate@TexasDirector.org


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