7 business mistakes to avoid
Posted on by Cindy Yip
Estimated read time: 5 mins
Before starting your new company and with so many brilliant ideas running through your head, take the time out to do some thorough research. Research the market that you’re looking to enter, it may be a good idea but is it a profitable opportunity? How many competitors are there and how will you differentiate yourself with your unique selling point? What about your target customers, how much are they willing to pay and how educated are they about the product or service? You need to make sure that what you’re offering to the market place is fulfilling a need so that your new company will be customer driven.
No financial planning and overestimating targets
Planning out your financials is crucial as running out of cash is the most common reason that an SME usually fails. Before you even start, you should have a financial forecast mapped out predicting costs and income, the research you’ve done will help you at this stage to find out the cost of items such as stock and rent. This will help you to not overestimate revenue targets for the year ahead due to excitement for your new company. Else you risk not reaching your goals towards the end of the year and your figures won’t add up or you won’t be able to cover costs as you expected to.
Not meeting deadline and inconsistency
As a company owner, you’re now responsible for every deadline the company needs to meet, whether this is internally or externally. Meet your financial and statutory deadlines by submitting the relevant forms and paying your taxes on time or else you could face unnecessary penalties from HMRC or even prosecution in extreme cases. Make sure your internal deadlines are being consistently met as well. For example you may set up a social media account and be posting very regularly but as time goes on, make sure you don’t neglect this and let customers know that your company is consistent.
Business structures and giving away too much equity
Think carefully about your company needs and where you foresee it to be going in the next few years before you decide on your company structure and ownership type. Many will either go down the sole trader/partnership or limited company route, look into how competitors are structured; how it will affect your finances and whether this will affect if other companies want to do business with you. In the early stages, it’s tempting to take on investors whom want to inject cash into your company but it can be dangerous giving away too much too early on. Make sure your visions are aligned and your investor really understands what you want from the company.
No business plan and funding
You may have a lot of ideas and plans in mind about what you want with the company and where you foresee it to be. It helps for this to be down on paper somewhere so you can refer back to it if anything regarding the company situation changes or you need to react to changes in the external environment. It may help you to spot flaws which you didn’t previously spot and help you to secure funding in the future if needed which banks or investors will ask to see.
Staying too loyal with bad advice
Many SME owners will build strong relationships with those that help them set up right from the beginning, whether this is mentors, accountants or service providers. This is understandable since they were there to support you from the beginning but bear in mind as your company grows, you will need specialist and more advanced expertise and by this point you may have outgrown the help they can give you. Ensure the advice or service they’re giving you is suitable for the growth of your company and don’t stick to bad advice out of loyalty. Good advice can save you time, money and stress but bad advice could also cost you more money and hinder your growth.
Taking on the wrong staff
A company can only succeed if it has the right team driving it forward with its owners. Your employees are a representation of the company and they need to be just as enthusiastic as you about the idea. Therefore when trying to recruit, providing an application form on top of requesting for a cv will help yield more suitable candidates; they’ll produce answers to key questions that you want to ask. Afterwards treat your employees well with rewards and incentives so that they feel valued by you and the company.