Whether you are thinking about starting a business, or you’ve just registered your new company, you’ll want to give it the best possible chance of success. Data indicates that 20% of businesses fail in their first year of operating, with 60% failing within 3 years. To help ensure you don’t fall at the first hurdle and join these statistics, we’ve compiled a list of 7 business mistakes you must avoid when starting a business. Let’s get started.
1. No business plan
During the heady days of starting a business, sitting down and writing a plan can feel like a chore. Refining products, setting pricing, building a website, developing marketing emails – this is all stuff that you can sink your teeth into. But writing a business plan is not quite as appealing. However, this attitude is a mistake.
New business owners often think that a business plan exists to demonstrate to an outsider (such as a bank or investor) how the business is going to operate, and whilst this is partially true, it’s not the full picture. Your business plan should help you.
It tells a story, starting with where you are now, what you’d like to become, and how you’re going to do this. Essentially, it’s your business bible. A well-written business plan will help you by providing clarity in regard to your:
- Business idea
- Potential problems
By having all of this information to hand in one document, you can spot the areas that you have adequately covered, and in turn, focus on the areas that still need attention. So, if you haven’t written one already, do it straight after reading this article. You’ll find there are a number of useful business plan templates available online to help you get started.
2. Pretending you have no competition
There are very few genuinely unique business ideas. You will have competition, and if you don’t keep abreast with businesses that overlap with yours, you will suffer. Rather than being perturbed by competition, or worse, completely ignorant, use these businesses to your advantage.
The corporate world is made up of companies that take an existing idea and improve upon it. You must do the same. Undertake diligent research into every business that could be considered a competitor, delving into information on:
- Products and services
- Pricing and payment options
- Operating hours
- Contact options
- Business partners
- Created content
- Social media activity
Store this information on a spreadsheet and then revisit it regularly, updating the information as and when it changes.
When comparing yourself to another business, you will find strengths and weaknesses. Don’t be afraid to be influenced by your competition – use the elements that work to make your proposition better. This will both improve your business and ensure you don’t get left behind.
3. Hiring too early
As business milestones go, hiring your first employee is up there with the biggest. However, doing this too early into your business journey can be catastrophic, with cash flow taking a major, unnecessary hit.
As a new business owner, there will be periods of remarkable stress. In tricky periods as a one-person business, the solution may be to get help, but this doesn’t mean you must commit to a full-time employee. Instead, when you do feel that assistance is required, test the waters by taking on a freelancer (sites such as Upwork and Fiverr can be useful) or outsourcing to a dedicated service provider (for example, accounting software).
If the need for specific assistance persists and sticking with the freelance/outsource solution isn’t working out or financially viable, then – and only then – explore hiring a permanent team member. Becoming an employer is a huge commitment. Do not rush into it.
4. Making a poor impression
Being a new small business is not an excuse for looking amateur. It doesn’t matter if you provide the best product/service in your industry. If you don’t scrub up, you’ll never attract customers in the first place.
Consumers are unforgiving. You will be judged on everything: Your company name, website, physical address, email address, the emails you send, telephone number, telephone manner, the content you create, and social media posts. Each of these is a chance to either belittle your business or project a professional impression, so put serious consideration into everything. It’s all-important.
If you suspect that an element of your business is letting you down, look at ways that you can improve it. For example, if your website isn’t up to scratch, make it better. If your address betrays the fact you’re operating from home, use a Business Address Service. If you’re using a mobile phone number as your business’ main point of contact, take advantage of a Business Telephone Service. Boost your odds of success and leave nothing to chance. Control everything you can control.
5. Too many products
Delivering one thing well generally takes time and effort. If your business provides multiple products and services – especially in your initial stages – you’ll risk confusing customers (“What does this brand do exactly?”) and diluting the core offering that you specialise in.
When starting up, hone in on the one or two areas that truly make you stand out. The things you do that will garner 5-star reviews. Focus on these and strip back on anything that’s not necessary. You can always revisit these at a later date, when you’re better equipped and have more insight into your customer’s buying habits.
It’s comparable to running a restaurant. Upon opening, it’s better to offer just a few dishes that you excel at. These will allow you to satisfy your clients and make a name for yourself. Only when you are comfortable and capable should you think about branching out and offering more.
6. Saying yes too quickly
When you have to hustle to get every customer through the door, it can be tempting to overpromise. Deep down, you know that a deadline is too tight, or a service is not feasible, but in your eagerness to secure a contract, you say that you will be able to deliver.
Your instinct as a business owner will be to make money. Nevertheless, you also need to protect your company. Knowing when to say ‘no’ is fundamental to doing this. Otherwise, you’re risking your reputation and ultimately, your business.
Whilst stretching yourself every now and then is fine, and can provide insight into your capabilities, regularly straining your resources will eventually backfire, unless your business grows with the demand (not always possible for a start-up). In most aspects of life, the term ‘comfort zone’ is seen as a negative, but in business, sticking to yours can be a positive.
7. Being oblivious to the numbers
You do not need to be a mathematics whizz to succeed in business. You do, however, need to get a grasp of your numbers. Failure to do this will be disastrous and can only end one way. Gross profit margin, net profit margin, operating profit margin, working capital, and sales revenue are all financial metrics that you need to acquaint yourself with.
If you simply don’t have a head for numbers, securing the assistance of an accountant or financial advisor as soon as your business starts generating money is essential. This will ensure that your business is operating compliantly, and save you from any nasty surprises further down the line.
Cash flow problems are the number one reason why businesses fail. By opening your eyes to your own finances as soon as possible on your journey, you can save your business from an untimely end.
Thanks for reading
So there you have it, 7 business mistakes to avoid when starting up. We hope you find this article useful as you look to start a successful business. Please leave a comment if you have any questions or views about this article.