Approximately 50% of small businesses fail within the first five years, according to the Bureau of Labor Statistics. That's a pretty big chunk of entrepreneurs who just aren't able to capture a foothold in the market, secure financing, and build a capable team - or, to put it bluntly, who just can't get it right. Starting and developing a small business is a Herculean task that requires guts, smarts, and initiative. A positive and proactive plan is a must, but so is knowing what pitfalls entrepreneurs commonly fall victim to. To learn how to avoid some of the bigger mistakes out there, read on.

1. Not Saving Enough Money

Running your business as lean as possible or saving money and reducing business expenses has to be at the very top of your list, especially in the beginning. Get your office furniture and supplies for free or at steep discounts via websites like Freecycle or Craigslist and take advantage of rewards programs at office supply retailers. For free services, check out a bartering website like U-Exchange - simply list what your business needs along with services you can offer in return. In a recent Huffington Post article, the top-listed cause of failure for small businesses was not saving enough money.

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2. Expanding Too Quickly

If you're lucky enough to find success early on, don't break out the bubbly just yet. Rapid expansion can be dangerous. By growing too quickly you and your staff may find yourselves unable to keep pace, causing you to lose sight of your current customer base - the people who played a major role in your success to begin with.

Put any expansion plans through a litmus test before initiating them and make sure you have the wherewithal to keep up with every aspect of your venture. This mistake came in at number three in a NY Times article exploring the reasons small businesses fail.

The writer, Jay Goltz, describes over-expansion as ...
"Moving into markets that are not as profitable, experiencing growing pains that damage the business, or borrowing too much money in an attempt to keep growth at a particular rate. Sometimes less is more."

Using financial management tools can also help you monitor cash flow and prevent overspending during periods of growth.

3. Ineffective Marketing

Know where to spend your money, and where not to spend it. Expensive TV ads and radio spots just don't make sense, especially when your brand has minimal recognition. This kind of marketing tactic works a lot better when there's already some awareness of your company in the marketplace.

Until then, stick with free marketing opportunities, like those offered by social media. If you already have accounts with Facebook, LinkedIn, and Twitter, check out some of the newer players like Pinterest, Instagram, and Google Plus. They cost nothing but your time, so the sky is the limit. Just make sure your content is engaging, creative, and relevant to your audience, and always respond to each and every comment.

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Aliza Sherman, entrepreneur and social media expert put it best:
"To utilize social media tools effectively and properly, you must absolutely generate spontaneous communications in direct response to what others are saying or to what is happening in that moment. Be yourself. Be conversational. Be engaged."

4. Unnecessarily Hiring Staff

Instead of just assuming you need help in the beginning, why not wait until you truly can't do it all yourself? Save money on staffing and training and you may be surprised by how much you can get done on your own. Once you have some steady revenue coming in, that's when you should make your first hire. No sooner. According to the Saratoga U.S. Human Capital Effectiveness Report, on average it costs $3,375 to hire an employee.

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5. Failing to Focus on Customer Service

At the start of your venture you have to set yourself apart from the competition, which is sure to be significant no matter your niche. One of the best ways to do this is to provide stellar customer service. Go above and beyond for every single customer, overcompensate whenever you make a mistake, and build a loyal and reliable client base from the outset. You could also find another differentiator (be it price or product) and drive focus on delivering this seemlessly.

Customer service was one of my areas of focus when I launched an Internet reselling business a few years back, and continues to be to this day. By quickly and effectively communicating with my buyers, shipping orders quickly, and offering a 110% refund when an error occurs, I've received only one negative comment out of over 180, resulting in a stellar feedback rating. This has improved my revenues a great deal.

Final Thoughts

Before you get too far, don't be afraid to ask for help. The best way to get the advice you need is through a mentor. Scour your professional contacts or seek one out through social media. You may also look for some mentorship program by reading through some best mentoring software lists. Hooking up with a "been-there-done-that" type can save you plenty of money and even more headaches, especially in the beginning. Someone who's willing to teach you can help speed up your learning curve tremendously.

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Did we miss any other essential 'must-knows' for early-stage startups? Got more tips? Let us know in the comments below!

James Pollard is a business owner and entrepreneur who constantly studies success stories and writes tips for marketing, finance, and sales.

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Written by Jo Sabin on Friday, January 30, 2015

Jo Sabin is Head of Designer Community at DesignCrowd. She's led the company's public relations and social media programs since 2012. With more than ten years' experience working with Australian and international tech startups in the creative industries, Jo has been instrumental in meeting DesignCrowd's objectives in Australia and abroad. Get in touch via Twitter.