What’s the difference between success and failure for a small business? I share five of the most common mistakes I’ve seen over the years.
Many skilled people dream of starting their own business and being master of their own destiny. However, many failed entrepreneurs underestimate the effort, resources and capital it takes to survive.
Before entering into business there needs to be a very clear understanding of why you are going into business, what it’s going to take to make it successful, does it fit with your lifestyle, and are you willing to make the sacrifices required.
Do you have sufficient cash saved to cover your living expenses for an extended period of time until you can draw a salary from the business and at the same time fund the startup of the new business?
Many businesses are started to avoid the rat race and leave behind the corporate world for a better work-life balance. The truth is, running your own business can require more time at work and less time at home.
If you don’t truly believe in the business you are going to start and love the work you will be undertaking, don’t do it. It has to be driven by a passion, otherwise, the long hours with little initial reward will make you long for the 9-5 grind you were so desperate to leave.
Every new entrepreneur thinks they have the next best thing and that their product and service is far superior than the market currently offers.
This may be the case, but the only way to verify that is through independent research and asking others beyond family and friends who don’t offer an impartial view. Better spend a little time and money upfront to verify you are onto a winner vs a lot of time and effort in starting a business and finding out later it never was a winner.
Who are your competitors? And how does your offering rank against them? Even if the offering is superior in quality and service and even price it may not be enough.
If the competition can out-market you, and the brands you are competing against are household names, it may be very difficult to spread the word and generate the traction that you need to have a consumer switch to your product.
There will be a lot you plan on doing yourself when you first start but you may lack critical skills to implement your plan. Bringing people in that have the skills you lack, to allow you to focus on the skills you have, is a good idea.
Avoid duplicating skills in the early years. For example, one IT genius and one business development genius is a much better combination than two IT geniuses.
This can be done by bringing on partners, employees or business advisory consultants. Each one has its own benefits and its own problems. Business partners may not always agree with your vision and ending a business partnership can be financial and emotionally devastating for the business.
Employees mean a fixed cost and you may not get the same commitment and drive as a business partner with a vested interest. Business advisory consultants may be more expensive than employees but they can be brought on as and when needed and aren’t a fixed overhead. Review each option carefully and figure out which one works best for you.
Are the market and economy ready for what you are going to launch? Most businesses thrive on a strong economy driven by high consumer spending, but some do better in a weaker economy.
Be mindful of companies offering something similar and of their trading performance. Are new companies entering into the market or are existing companies exiting the market and/or diversifying into other areas?
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