The ins and outs of operating a new business can be difficult to navigate. What are the common rookie mistakes new entrepreneurs make, and how can they be avoided?

Small businesses have had a rough time in the recession, despite of government aid packages and tax relief. According to data from the Small Business Administration’s (SBA) Small Business Economy 2010 report, 60,837 small businesses closed in 2009, up from 43,546 in 2008. While the oft-cited belief that 95 percent of new businesses close in five years may be false (the real figure is around 49 percent), it can be daunting to throw your hat into the ring given such a high failure rate.

There are so many missteps in starting a new business that there’s even a convention, FailCon, devoted to studying the mistakes rookies entrepreneurs often make. As BNET reports, at 2010′s FailCon, entrepreneur and author Steve Blank outlined five mistakes he believes most often lead start-ups astray.

• Letting your business plan dictate the trajectory of the business;
• Assuming your business model is correct;
• Deciding all the information you need to run your business is in your building;
• Believing your mistaken hypotheses are crises; and
• Thinking you have all the time in the world.

As Blank explains, these types of mistakes are bad for start-ups because they are still forming business plans and the operation of a new business must be flexible to meet the changing capabilities of the company and the changing needs of customers. Blank describes a start-up as “a temporary organization used to search for a scalable and repeatable business model.” After speaking with customers and investigating flawed projections, an entrepreneur can approach investors with a pitch that describes not what he or she plans to do but what the entrepreneur has learned.

That’s not to say having no business plan is the best way to develop a new business. Planning is one of the keys to new business success, but being flexible with the plan can help if you encounter hurdles.

Conducting research is the first step to opening a successful business. The question, “Is there demand for my product or do I think people will demand my product?” can be answered by doing market research, studying competitors and looking up sales statistics for similar products.

“The foundation of a good business is a good business opportunity,” Dave Lavinsky of growthink says. “As an entrepreneur, you want to fill a need in the marketplace. Unfortunately, many businesses are started solely to fulfill an entrepreneur’s ego.”

Patricia Shaefer of Business Know-How.com cautions to stay within your bounds. Your business plan “must be realistic and based on accurate, current information and educated projections for the future.” She lists the elements of a comprehensive business plan:

• Description of the business, vision, goals and keys to success;
• Workforce needs;
• Potential problems and solutions;
• Financial data, including capital equipment, balance sheet, income statement and cash-flow analysis, sales and expense forecast;
• Analysis of competition;
• Marketing, advertising and promotional activities; and
• Budgeting.

The SBA provides a variety of resources for entrepreneurs looking to start a new business, including tips on writing a business plan.

Once your business is up and running, it is important to keep track of your progress and identify possible areas of improvement. Echoing Blank’s advice, Startup Freedom advises flexibility: “Be open to change. Seek customer feedback and apply the feedback to your model and your offer. Keep costs down so you can allocate funds to develop and tweak different areas of the business.”

In a struggling economy, the ability to learn from experience can help business owners cope with financial setbacks. Michael Stoddard, CPA, tells Accounting Today that periodic review of business models — e.g., re-evaluating operating expenses and repricing — can help ensure start-up owners are prepared for lean times.

“Can the model generate revenue?” Stoddard asks. “If not, there is little hope. If it can, you can always fix it.”

Related: 8 Mistakes Start-ups Make

Resources

The Small Business Economy 2010
The Small Business Administration

The Seven Pitfalls of Business Failure and How to Avoid Them
by Patricia Shaefer
Business Know-How.com

There are 387 Million Ways to Fail. Do You Know How to Fail Well?
by Lindsay Blakely
BNET, Oct. 25, 2010

The 6 Untold Reasons Why Businesses Fail
by Dave Lavinsky
Growthink, March 6, 2008

Why 80% of Internet Businesses Fail
Startup Freedom

Why Businesses Fail
by Christine Janklow
Accounting Today, Sept. 4, 2009