When starting up a business it’s wise to think, strategically and in a risk prevention manner, about all the bumps in the road that could potentially damage your business before it’s even begun. Any one of them could sabotage your new business venture and turn it into a failure rather than a success.
The start-up journey of all successful business owners is made up of good decisions, and learning from mistakes made and by fully understanding risk and the consequences of strategies followed.
Accordingly to a recent survey by Entrepreneur, over 50% of start up companies fail in their first four years of operating.
The following list of common pitfalls has been taken from the experiences of our EFM Growth Partners, who have each identified and resolved the following start up issues throughout their business advisory career. Our highly knowledgeable and experienced team supports entrepreneurs and start-up companies through their journeys, and use their understanding to help guide them through the pitfalls that lay ahead.
But just what are the biggest mistakes business owners can make?
- Not having sufficient cash
Cashflow can cripple the most established businesses, and poor financial management, unrealistic revenue forecasts and overspending can have a huge part to play. 95% of businesses will not make money when they first start to trade and a large proportion of new businesses will not make significant money for years. This means you have to have enough money to live, while your new business is getting established, as well as having enough money for the business to survive and grow. Not having the available financial facilities to do this before you start your small business is a serious business mistake.
There are now a multitude of funding sources including equity, traditional lenders and the alternative funding market. Be sensible with money and ensure you have a strong set of disciplines in place to forecast expenses such as tax bills, office repairs or even legal issues.
- Inappropriate or the wrong business model
If your new business is going to be successful, you need to know what you’re actually selling and how you’re selling it “Your Business Model” and from this craft your Unique Selling Proposition accordingly. The question the USP answers for your customer base is, “This is why you should buy from me, instead of my competition”. The catch is, your USP must also provide your potential customers with a specific benefit that they see as attractive. It’s not enough to say that your product or service is “better” or has “more value”. Vague-speak and feature rich rather than benefit led doesn’t cut it with customers who want to know how a particular product or service will apply to them.
Also the way in which a customer can access or buy your product or service is increasingly important. If you want to sell an annual service but the client wants a monthly solution, then your chance of winning the business may diminish.
That’s why developing a USP before you bring a product or service to market is a good way to determine in advance if it will sell. If there’s nothing that sets your product or service apart from the competition, why would anyone want to buy it?
- No Marketing Investment
Following the common advice “Build it and they will come” is another serious business mistake. Come where? Why? Or even when? No one will know without some effective marketing. Small businesses are reluctant to spend money on marketing, let alone a significant amount. Free marketing can be excellent, but most free marketing strategies take a significant amount of time before they become effective.
Create a strategic marketing plan, set up some marketing campaigns, track their impact/return on investment and keep doing it if you want your business to be successful. Market your business before you open it. There’s no rule that says you have to wait until your physical or virtual doors are actually open.
- Ignoring your competition’s innovations
Not paying attention to your competitor’s business activity is another potentially fatal business mistake. Another aspect of competition you need to understand is market saturation. The pie is only so big, so to speak, for every product or service. So, for instance, if you want to open a fast food restaurant business, there may not be any “room” left in your local area to do so because of the number of restaurants that already exist; the market is already “saturated” with this kind of business. This is also about whether you have anything sufficiently different or innovative to get customers interested.
Monitor your competitor’s activity closely and conduct a review and SWOT analysis at least once every three months to get an understanding of their product offering, pricing strategy and marketing campaign activity. You can use your competitions methodology to help inspire and drive your own entrepreneurial creativity.
- Trying to do everything yourself
A small business owner may be willing to learn how to be a jack of all trades, but it doesn’t have to be that way. Effective delegation can be one of the best ways for new small business owners to build their businesses, free up their time for business activities that require their unique expertise, and build a team positioned for future success.
Running a small business, even if it’s a one person company, involves so many different tasks that no one person can do them all efficiently. Even if the business owner was qualified and had all the skills to do an outstanding job at whatever they set their hands to, they’re all inevitably constrained by time. Nowadays there are so many outsource opportunities available for companies. Also creating future value as businesses must run without a founder if ever sold. Most days, you’ll be lucky if you even get done what you planned to get done when your day started. For example, do you really need to do your own accounting? Accountants have a lot more financial and tax knowledge than you have, more than likely, and hiring an additional specialist can save you a lot of time and money in the long run.
If you’re interested in finding out more around how EFM Growth can help guide you through the complexities of starting up a business, speak to our team of experienced Growth Partners. Get in touch today through email or call 01582 516300.