Starting a business is not easy. It requires incredible amounts of resilience, entrepreneurship and business acumen. It’s no wonder 60% of UK start-ups fail within the first five years. This doesn’t necessarily mean those companies didn’t have brilliant ideas, dedicated leaders and heaps of talent in their ranks –– perhaps they fell victim to one of the common mistakes that often spell the death of a start-up. Here are the top five of these mistakes to avoid if you’re launching your own business.
More likely than not, your business lives in a saturated market. A plethora of other companies are probably doing similar things to you, and you have to be aware of these competitors. It’s vital to have a clear idea of what is so special about your offering, how you’re going to translate that into profit, and what you’re going to do in difficult situations. A successful start-up will have a complete business plan, including a contingency plan — defined as “the process by which you account for uncertainty by factoring in any risk” — to make sure you’re covered for any worst-case scenario.
A solid business plan encompasses a clear description of your business, your current and future employees, your management needs, any opportunities or threats you can predict within the broader market, your financial and budgetary forecasts, marketing initiatives, and competitor analyses. Without it, you might struggle to define what your goals are, whether you’re achieving them, and what you need to tweak in order to be successful in the long and short term.
In many start-ups, the founder is the only senior-level member of the team. At the same time, they are usually the person who came up with the business idea and has a good understanding of the industry. None of this means they’re sure to have the appropriate management skills. The jump from professional to manager can be tough, and it’s where many companies initially fail. The trick to good administration is pretty simple, though. It’s about delegating what you’re not good at, which can also include management itself.
If you’re running, say, a software company, you might be incredibly talented at developing programmes, selling them, or coming up with novel ideas that can transform the product and make it the best in the market. You might even be brilliant at all three. However, this doesn’t mean you know how to manage programmers, salespeople or product developers. If management isn’t one of your strengths, hire C-suites, directors and line managers as and when they’re needed. Don’t be afraid to do so in the first few months if you can afford it, as this ensures you have the correct operations in place from the get-go.
We live in a highly connected and competitive world. This is great for consumers and can be an absolute godsend for businesses if utilised correctly. Unfortunately, many companies fail to understand how important customer engagement is in this day and age. When every client can hop on any website and social media network –– whether that’s Yelp, Trustpilot or Twitter –– and tell the world about their experience with you, you have to deal with your customers in a pleasant and service-oriented manner. If a client has a complaint, for example, don’t become defensive, no matter how rude they are being. Listen to their feedback, make it clear that you appreciate it and take it on board, then provide some sort of solution, even if it’s just a voucher.
Many start-ups also neglect their marketing efforts, instead often focusing on creating their products, managing their day-to-day operations, and selling hard and fast. Marketing is a long-term process, and when done in a smart way, it can boost credibility, brand awareness, and as a result, your market share. Make sure you set aside enough resources for your needs. As a business owner, it is also vital that you create a marketing strategy and understand the processes involved, otherwise you might find yourself spending haphazardly without satisfactory results.
This might seem an obvious point, but finances are critical for the success of any company, let alone a young start-up. Running out of money is disastrous, and usually happens when owners don’t realise how much revenue their business generates. Most owners know how much is being spent, at least on a day-to-day basis, but without correctly comparing that to their regular income, deficits are going to emerge. It’s incredibly important to have realistic budgets that account for the organisation’s needs and means. This includes profits, concrete investments and any in the pipeline. It also requires thinking about where funding could come from if the company was in need.
When it comes to a regular stream of revenue, there’s much to be said about your own pricing. In a saturated market, there’s great temptation to lower prices. This might be a solid way to attract clients initially, but clear boundaries have to be drawn and the profitability of the business has to come first. Financial hurdles can also come about from lack of sales or instability, especially if your organisation relies heavily on one client — it’s always good to diversify, whether we’re talking about different companies or types of customers.
On the other hand, too much business at once can also spell financial disaster. A lot of start-ups see major growth in the first couple of years, only to crash and burn without the appropriate systems and contingencies in place, particularly when business loans are involved. Remember, slow and steady wins the race.
Agility is key, and the beauty of small businesses is that it is much easier to adapt compared to big heavyweight conglomerates. However, when your start-up is your baby, you might be reluctant to change things. Unfortunately, sometimes you just have to. Companies that fail to recognise their needs to evolve — whether it’s their products, processes or ways of thinking — are doomed from the start. A business that does not regularly adapt to movements in their market will encounter more and more obstacles.
But how do you know what needs to be transformed? By carrying out consistent data-based reviews. Major corporations and smaller businesses alike have use data to bolster their strategies in order to progress and correct mistakes. You should be gathering as much information as you can, using these insights to make data-driven decisions that will boost business performance. As valuable as a gut instinct can be, proof is always better than a hunch.
