So you have had a great idea floating around in your mind for a couple of months, possibly years. This idea, if executed properly, could mean a successful business, run by YOU!
Imagine being your own boss! It sounds incredible, and if you execute everything properly, there is no reason why it shouldn’t be!
Common business mistakes
First, a word of warning, starting your own business takes patience and perseverance. It’s easy to fall into a number of traps that will immediately put both you and your business under pressure! Let’s look at the steps you need to make success of your business.
- Proper market research and in-depth planning
Before sinking any of your own capital or that of an investor into your business venture you need to ensure that you have done enough planning as well as market research.
You might think you have the greatest business idea, but it might not be viable at all and ultimately doomed to failure.
You need to establish the following:
- Is there a customer base for your product or service?
- Will they continue to use your product or service for an extended period?
- Who are your competitors?
- What product or service do they provide to your potential customer base?
- How similar is it to your product or service?
This is just the tip of the iceberg! There are many other types of questions that you can try and find the answers to while doing market research.
- Proper financial planning
Whether your business will sink or swim is dependent on excellent financial planning.
Your business will in all likelihood fail if you struggle with the following:
- Insufficient capital.
- No backup plan when things go wrong financially.
- Stubbornness on your part in seeking financial advice or help when financial problems arise.
Drawing up a business plan is essential. It can easily be adapted as your business increases in size. Do not neglect to draw up a contingency plan as well. This will provide options should unexpected problems arise. These problems will be beyond your control and will affect your cash flow and ultimately your business.
- Setting the bar too high
Of course you want to have a successful business and make money. It is important however, to set realistic forecasts and projections in terms of profitability. Precise forecasting is often linked to proper market research which we discussed earlier.
This will help to ensure that you do not go overboard with staff recruitment, buy far too much stock or overspend on premises rental.
Another pitfall to look out for is diversifying too quickly. If your business is successful from the beginning you should plan any expansion or diversification properly. Often, keeping to your core business idea is the best, at least until you have built up a fair amount of reserve capital.
- Know what your competition is doing
Your competition is your biggest threat in business! It is very important that even during the start-up phase of your business, you continue to monitor your competition, which can be in the form of another business or product.
To find your competitors:
- Monitor advertising and press reports.
- Visit exhibitions/trade fairs.
- Conduct internet research for similar products.
- Source the correct suppliers
Your business will rely on various suppliers who provide either a product or service essential to the day to day running of your business.
Consider the following when searching for suppliers:
- Price of the product/service.
- Value for money.
- Quality of the product/service.
- Reliability of the supplier.
Insist on a formal contract when entering any agreement with a supplier.
- Customer credit arrangements
If you are offering your customers credit on purchased goods, it is imperative that you perform a number of important checks before entering any agreement. Taking note of the following steps can help to ensure that your customers pay their bills on time.
- Perform credit checks on any customers wanting credit.
- Use a credit agency to run other checks including bank references, trade references and online credit ratings.
- Carefully explain credit terms to customers.
- Offer discounts for early payment as an encouragement.
- Have a legal option available if customers do not pay in the prescribed time.
- Effective control of stock
Always ensure that you have enough stock by:
- Knowing the least amount of stock necessary for your business to operate effectively. Order in stock when this level is reached.
- Carry out stock audits on a regular basis.
- Effective recruitment of staff
Staff are an investment for your business and although it might be tempting to hire someone to handle every specific job, as a start-up business this is not always possible.
As the owner, you will often take up the slack and perform a number of jobs. As the business grows, you can consider increasing your staff contingent but consider the following:
- Full-time or part-time employees?
- Can you make use of temporary staff?
- Can you use a freelancer for a once of job?
Starting a new business is both exhilarating and terrifying at the same time! Thorough planning beforehand will go a long way in making your business the success that you want it to be.