Nobody sets out in business to fail. But the hard facts are that the majority of new start ups fail in their first 2 years.
Whether you are planning to turn your hobby into a business or you have global aspirations, many of the pitfalls in the early stages are very similar for all new businesses.
Having helped hundreds of start-ups that have gone before you, we have collated some of the most common pitfalls, to help you avoid them and get a head start.
1) Inadequate market research Possibly the most common error and the easiest one to make before you have even started on your business journey. Confidence and positive thinking are essential - however, if you don't take the time to identify if there really is strong enough demand for your business, then there's no point going past this stage. It's easy to get wrapped up in the excitement of your new venture, but your business must be viable.
2) Failing to plan effectively Even the most successful businesses experience peaks and troughs. Make sure that you allow for this in your plan. Plot out how demand looks from a seasonal perspective and how your sales/cash is affected - how can you flatten the troughs? Are there other services/products you could offer or ways to sell - eg: online? New small business owners often start without a plan or fail to follow their plan. Learning to prioritise, organise and improvise might be new skills to you, so a mentor or advisor can help ensure you keep on track.
3) Not enough capital
Most business owners project operating costs to the point of break-even. Start up costs should include all the costs required to open for business, all the operating costs, stock, staff, premises, marketing etc.. to the point of profitability. This means that the ‘break-even point,’ should be when the owner estimates he or she will be able to get paid the minimum salary required - remember to actually pay yourself a wage. Don't buy anything unless you actually need it.
4) Lack of knowledge
Most new entrepreneurs start a business because they are either an expert in what they do or are passionate enough to turn this into a business. Just because you know your stuff, does not necessarily mean you could succeed on your own and know how to buidl a successful business.
You wear all the hats – While in your current job you might be responsible for purchasing, in your business you’ll also have to fill all the other roles such as customer service, human resources, management, administrator, filing clerk, HR manager, marketing, office manager, consultant, and CEO.
The buck stops with you – This one is huge. So many people get overwhelmed in their own business because they did not account for the seemingly boundless obligations and time they take. This is why outsourcing what you can is vital - leaving you to get on with growing the business.
Obligations and Law – You need to know what laws your business is subject to and what structure your business should be. This includes sole trader/limited, vat/no vat, expense claims, licensing and permits, employees, insurance requirements, tariffs, taxes, payroll, record keeping, health and safety and more.There is an enormous amount of expertise required to operate a business. 5) Ineffective marketing Yes, this is a biggie - not many business owners can claim to be marketing experts. Understanding your customer and mapping the journey they take with your business is the biggest single tip we can give you. Advertising is not marketing and yet many business owners believe this is how they will get business - advertising is a small part of your overall marketing strategy. A small business can easily exhaust all capital in advertising, whether it’s traditional print ads or pay per click. Unless these are done with purpose, strategy and to the right audience, it's wasted money and time. Common mistakes can include inefficient marketing, poor content, ill timed advertising, wrong target market,overspending, negative press, poor reviews, loss of sales and many more.
6) Failing to rectify mistakes Sometimes business owners make mistakes, that's normal as we are human. But even worse, when they do spot them, they do nothing. If the business owner has come from an employment, many times he or she does not fully grasp that the buck now stops with them. This is where a business mentor can be a lifesaver. Addressing mistakes head on is key and customers always remember how you solved the problem and not the actual problem itself.
7) Refusing to delegate Small business owners are usually ‘take charge’ people. They know their businesses better than anyone else. These owners often retain duties and responsibilities far beneath their capabilities and not in the best health of the business. As a small business owner, it really helps to decide which jobs would be better off delegated or outsourced. Do not hang on to any duty, which would be better delegated - so you can focus on growing your business. 8) Time management Distractions can easily eat away at your precious time and home based businesses face further interruptions from family, door bells, chores etc..Keep a basic schedule for your day. For example: 'Golden 30 minutes' first thing in the morning to reply to customer messages, quotes, social media, checking your cash etc. this gets the essentials out of the way and then you're free to focus on other important stuff.
9) Self motivated When you’re an employee, you have a job description and someone is usually telling you what to do. You will be in charge of your own actions as a small business owner and business doesn't just land on your plate. Becoming self-motivated with the kind of discipline and resilience needed can be a tough adjustment for people coming from long-term employment. It's worth taking a course in this or getting help form a mentor to boost your skills.
10) You need to adjust to uncertainty As an entrepreneur, there’s no monthly salary - the sky's the limit and you set your own destiny and financial goals. You will deal with the uncertainty of the fluctuations of the economy - Corona virus has been the biggest challenge of all for many businesses of all sizes and provenance. However, being small makes you able to adapt quickly, make decisions with lightening speed and implement new services/products to widen your capacity and selling channels. The successes of your business belongs to you.
There are plenty of potential pitfalls waiting for the new business owner - the trick is to learn from those who have already been there and bought the T shirt.
If you're thinking of starting a business and need expert advice, please get in touch and we will be happy to help.
You can contact David directly for expert help with your small business in the Isle of Man.