An enviable number of start-ups often fail in their first three years of business inception and a greater number failed due to premature scaling. The negligible no that gets to maturity stage is those few that often avoid and learn from common mistakes that many SMEs usually make. A searchlight was beamed a few start-ups to gain insight from their experiences with a focal lens on the mistakes that set them back. The list is endless but the following highlighted below are a few key mistakes start-ups businesses struggle with and how small business owners can evade them.
*Lack of Business plan:
A business plan is a document describing a business, its products or services, how it earns (or will earn) money, it’s leadership and staffing, it’s financing, its operations model, and many other details essential to its success. It is the most vital blueprint or operational manual a small business owner must possess when starting a business venture. The document practically gives detail of what the business is about, who the target market is and how much profit is projected for a stipulated period of time.
Regrettably, most new business owners ignore this vital element in business, venturing into their enterprise without a plan or setting aside the business blueprints, running in the dark. Business plans should be studied, reviewed, updated and effectively executed.
I once believed that all I needed to succeed in business was a partner who had skills that I obviously lacked. I was a goal getter, brilliant sales, and marketing stallion and looking for someone with accounting and administrative prowess. It was eventually one of the greatest mistakes made as an investor and entrepreneur. was Regrettably the venture failed awfully after a while despite partnering with people who had the right skills needed. I later realized why! My partners were not truly committed to our business goals and objectives. When you are looking for business partners to team up, ensure they not only have the desired expertise but they must be committed to the aspirations of the venture in question.
*Do not be a lone ranger! :
It is imperative for a business start-up to know that he cannot do it alone. The 21st-century business owners cum start-ups demand more than one owner to be successful in the business world. And the earlier this is acknowledged the better for business growth and success. Besides getting the right partners, you should offer equity to other investors in exchange for cash who may not be willing to partake in the daily operations of the business.
Hiring the wrong human resource has often been the barn to the success of business start-ups. One of the most important decisions business owners must take is to find the right workforce to engineer the proposed venture. As a small business owner, you must be able to identify the positions to be filled, the skills needed and character of the employee and level of expertise required. It is painstakingly slow and agonizing but it is crucial to get the appropriate workforce if you must succeed in your new venture.
*Wrong timing at Business Scaling
Scaling a business means setting the stage to enable and support growth in your company. It means having the ability to grow without being hampered. It requires planning, some funding, and the right systems, staff, processes, technology, and partners. Here is a major recurrent mistake new business owner’s make, scaling too early. Most start spending money too early on marketing, promotion, and HR when all is needed and required is to spend money on research and development, developing better products and quality services.
Consequently, the end result is racking up losses in the first few years of the business that will eventually make it difficult to breakeven when the venture eventually start making profits. This for most new business owners often leads to cash flow problems as investors are unwilling to put in more money.
*Business Finance Hurdles:
As start-ups, your small business is expected to scale five key financial mistakes, it is imperative you avoid the following:
1. Lack of Cash Reserves
One of the biggest financial mistakes for small business owners to avoid is not planning larger cash reserves. There are a number of ways to fund a small business, and as you raise funds, you need to ensure that you have adequate cash reserves. You never know when a situation will come up and you’ll need to tap into your immediate cash–without time to apply for an emergency loan.
Don’t forget about cash reserves in your personal life as well. While you want to keep your personal and business finances separate, you also need to be prepared to take care of your personal needs while you’re waiting for your business to become successful. If you can’t fund your lifestyle, you’ll soon have to quit and get a job to earn enough money to survive.
2. Inadequate Insurance
None of us likes to think about insurance. However, it’s an important part of making sure your business is protected. Many business owners make insurance mistakes like cancelling their coverage before they have a new policy in place, or they don’t realize what small business policies they need.
You need to make sure you have the right insurance for your circumstances, from auto insurance and health insurance to various liability policies that you might need to protect your professional reputation and business. You might even need to set up insurance plans for your employees.
3. Unorganized Accounts Receivable
Set up a system to ensure that you are paid. One of the hardest situations to deal with as a business owner is figuring out what to do when a client doesn’t pay. You can cut down on these situations by being clear about payment terms–have the terms printed on each invoice, and make sure they are clear when you create contracts.
You should also have a system in place that will help monitor which payments are overdue, and a system for sending reminders and taking other actions for collecting on what you’re owed. I use ZohoBooks @ www.jscglobalccountingservices.com, for my invoicing. Every week I receive a summary of who still owes money so that I can see exactly what the next steps need to be. I also have a process related to when payment is 60 and 90 days late. Get organized so that you can smooth your cash flow.
4. Neglecting Your Business Credit
While it can take some time to reach the point where your business qualifies for credit on its own, it’s important to do all you can to get to that point. It’s true that your personal credit matters when you first apply for business credit. However, that doesn’t mean that you should neglect your business credit. Do what you can to register your business with a business credit bureau, and use your number when completing transactions. Pay what you owe on time. Curled @www.allbusiness.com
*Ignoring profits over revenue growth
Some start-ups focus essentially on numbers such as revenue, subscriber growth, and traffic over profits. Though they are quite important business ratios, investment entrepreneurs look out for good profitability values when deciding to fund a business. It is, therefore, germane to have a keen eye on profitability. It is very important to ensure that your business can actually generate enough revenue to cover the running cost of business vis-a-vis salaries and more before spending on promotions and advertising.
*Lack of Business Focus and Direction:
Businesses owners that fail to determine their focus and how to accomplish the desired objectives are bound to fail. New Business Owners or Start-ups must explicitly determine what their objectives are and how they intend to achieve them within a stipulated time. The only variable here is how to achieve the business objectives and not the objective.
*Lack or Poor Distribution Network
Every business needs a strategic marketing plan, a route to market and sell its products or services. New business Owners or Start-ups that fail to gain quality and vibrant market share often fail over time. Once you are able to distinguish your target market, figure out how to reach them effectively. You must endeavor to identify the right distribution network and investing in developing and nurturing your channels.
The avoidance of the enumerated business mistakes above by startups is the bedrock of resounding business success. As startups, making extensive research and finding the right business mentors, will go a long way to ensuring your business is able to survive the early death traps.
Once you are able to survive the first three years, you’re fortunate. You’ve been able to do something that 80% of new businesses owners haven’t been able to do.