Research, Hiring, Passion: Common Mistakes Small Businesses Make and How to Avoid Them
In this recession with redundancies becoming the norm, many people are finding a new path and launching their own businesses. Doing so can be risky and success can be hard to come by. With 20% of new businesses going bust within their first year and 50% failing in their first three years, it is important to avoid those mistakes that would make failure a possibility. It is not always easy, but by being aware of any potential hazards and through diligence and hard work, any new business has a greater chance of being successful.
Poor Preparation/Inadequate research - Research is essential in order to find out of the business is viable and to find who your competitors are and what they are doing. In depth market research does not only mean sitting on a computer crunching numbers but also brainstorming with friends, family and colleagues and getting feedback. Questions to ask are:
Ã Who will my customers be? Who will benefit from this?
Ã Is there a gap in the market for this?
Ã What is my unique selling point?
Make sure you make use of the internet and research, research, research. Speak to people as well as organisations such as Business Link (www.businesslink.gov.uk) who will give you advice on how you should approach starting your business.
Weak financial planning Â Many businesses fail due to insufficient capital and poor cashflow. The way to avoid this is to have a good quality business plan. This will enable you to crystallise your expectations and can be used as a tool to bring structure to the financial side of the business. Make sure that you have contingency plans in place should the unexpected take place. Delays can be costly so make sure that the correct insurances and taxes have been paid. Find out what kind of finance is there and get it before striking out. Furthermore, think about doing it part time until you are profitable.
Setting your sights too high...or too low Â Even if you are competing with bigger companies, do not sell yourself and your company short. Be realistic about what you can do, but do not be overly negative for example you may be smaller but that means you can offer a more personalised service. Everything has a positive side. By the same token, make sure you can offer the services you say you can. If you promise the world and cant deliver, your reputation will suffer.
Lack of passion Â If you are doing it just for the money (which is correct but it cannot be just for that reason), then when the going gets tough and its not rolling in, you will lose heart very quickly and your business will lose momentum very quickly. If you are truly passionate about your business, you will push through. Year 1 where most of the groundwork is done with the passion and enthusiasm for the project, Year 2 can be difficult because sometimes, the returns are not as expected. Work through them.
Not hiring and/or hiring the wrong people - I am fortunate that at the minute, I do not need any staff as I am taking on as much work as I need and can do. However, when the time comes, I will do so. Make sure you find the right people to do the job and do so at the right time and within means that you can afford. If you can only them for an hour a week, then do so until you can hire them for longer or hire more people. Make sure that they can do the job or else they you will spend more time and money fixing their mistakes.
Insufficient support Â make use of friends, family and mentors. The latter can offer advice, support and encouragement when you need it.
Putting all your eggs into one basket Â that is, relying on only one customer/supplier for all your needs. You have to have a broad range of clients and suppliers and research them properly before entering into agreements with them. Do they have a history of not paying on time? Do they have a healthy breadth and range of clients themselves? This means that they will not be too stuck should one of their customers/suppliers be unable to pay. Another mistake is making poor credit agreements. Check and recheck everything.
Not being proactive in sales/marketing Â if your sales donÂt grow, then your business will not. If you are a sole trader, then practice, practice, practice. If you cannot convince those closest to you, then your potential clients wont be either. Get involved in networking events, trade fairs and conferences. You will be able to reach a large audience without having to overstretch yourself. Make calls, visit businesses, demonstrate what your business has to offer.
Do not skimp on the technology you need Â buying second hand is advisable when starting out, but make sure that they are able to do the work that you are buying them for.
Lastly, be prepared to work hard. Building a business from scratch is not easy but if you stick at it, it can grow. Even if it doesnÂt (which I doubt), it is better to try and fail than have regrets.
I hope this helps. Take care readers...