Many of us have an ambition to run our own business but there are common mistakes that are often made that can damage or even destroy our dreams.
Start a business for the wrong reasons
Many people want to run their own business to escape from their current employment or to pursue a dream life. Fundamentally there is nothing wrong with these motivations if they are balanced with sound business judgement. For instance, just because you love cooking it doesn't mean, necessarily, that you would be successful at running a restaurant. Try taking an objective view of your proposed business and make sure it still stands up as good business idea.
Fail to create a business plan
A good business plan is the cornerstone of a successful business. It will provide you with a picture of your anticipated income and expenditure over the next 12 months. It will tell you when you are likely to start making a profit and when you may think about expansion. Most importantly it can provide a full picture of outgoings and helps you estimate cashflow more easily going forward.
Many new businesses will fail simply because of poor funding from the outset. It's better to delay starting your business while you arrange a proper level of funding rather than dash to start operating too early.
Overestimate your projected income
With their enthusiasm for business success new start-ups will often overplay the level of expected income. It is natural for entrepreneurs to think their killer business idea will take off like a bomb but most businesses are slow burners, taking a few years to really take off. Always under estimate your income and then you won't have too many shocks, and maybe even a few surprises.
Underestimate your outgoings
Similar to the item above, new startups will generally underestimate the costs involved in running their business. Maybe you have been running your business on a part-time basis and are now planning to go full-time, this will bring a whole new level of expenditure. Perhaps you've been borrowing equipment or a vehicle at little or no expense, eventually you will be required to purchase your own which will be another cost to your business. Don't forget of course that you will need, eventually, to take an income yourself. Many new businesses appear to be profitable when the owner is taking out little or no income only to fall into loss when they start drawing one.
Focussing on turnover not profit
In the early days new business owners will always focus on improving turnover to drive their business forward. Quite often they will take on contracts or make sales at a reduced price not realising if there is any profit arising from these deals. Always work the profit on every job taken or sale made as ignoring this the quickest route to failure.
Expand too quickly
Flushed with early success many new entrepreneurs will look to expand too quickly. Expansion will always mean more expenditure and this can be a killer blow to a fledgling business. Always hold back on expansion as long as possible and give your business time to get established.
Poor market research
It is easy ,if you have a new product or service, to ignore the competition. You can easily convince yourself that your product is superior and therefore is bound to sell, only to find the competition has cornered the market by having excellent contacts and customer service. Of course you can take on these big players and win but you need to be aware that it will take longer and may need a lot of financial input.
Poor customer service
In the pursuit of turnover it is very easy to forget about the customer and the service you are giving them. It is easy to cut corners as you try to fit more into every day and this approach will eventually damage or kill off your business. If you always put the customer experience at the centre of your business, and obtain their feedback regularly, your business will flourish and you will get many recommendations.
Poor time management
Running your own business is hard work, often seven days a week with not a moment to spare. In these hectic times it is natural for us to focus on generating business and forget some of the other crucial areas of your enterprise which can be catastrophic. Bookwork, stock ordering, customer complaints, staff issues and general maintenance of premises and equipment can fall by the wayside in a business owner's busy schedule. Keep a 'to do' list and a well structured diary and allocate time for all elements of your business then you will avoid firefighting problems which can mount up and threaten your business.
Hopefully the above points will help you avoid some of the pitfalls when staring a new business. Oh, and keep an eye out for more of our articles for small business owners and entrepreneurs in the future.