When launching a business, there are a vast number of steps involved in the whole process and it is generally difficult to avoid confusion along the way. Everyone makes mistakes, yet when it happens to your start-up, even what seems to be the simplest and most harmless errors could cost you greatly in the long run.
The process of starting a business can be remarkably risky and the success rate is not always 100% guaranteed. Businesses are highly exposed to failure during the first few years of trading; with 20% of new businesses closing within the first year and about 50% in within their third year.
The figures may seem alarming, yet worrying about this is unnecessary. Preparing yourself for the challenges every business owner faces should be your top priority, so with hard work and knowledge of the issues, any new business can grow and become a great success.
The following are some of the major errors that should be avoided when launching a business.
- INADEQUATE MARKET RESEARCH
Planning and doing a thorough research is vital to ensure that your business ideas are feasible, plus a competitive pricing in the marketplace should be present to provide a sufficient return.
A common misconception is that those who have failed lacked adequate funding or have not put the right team in place. Unfortunately, the main reason for numerous business collapses is the insufficient time spent for doing research, without focusing mainly on their business ideas, as well as its viability in the market. The absence of a proper market research is one key problem for most newly launched businesses – where one can easily get carried away with a specific business idea, then launch a business without fully testing its viability.
- INEFFECTIVE FINANCIAL PLANNING
Financial planning is highly crucial for new businesses – a lack of capital, contingency plan, and the hesitancy to seek professional assistance can attract major problems and issues.
A sufficient amount of capital is vital for your business’ survival and affluence, which is a fundamental indicator of your business’ status. It’s greatly suggested to create a high-quality business plan to draw the attention and secure the right customers, as well as the amount of funding required to aid in the success of your business. Having a well-thought-out business plan can keep your expectations realistic for what the business can offer. It can also be used to structure the financial portion of your business, which can be altered and updated as your business grows.
When you lack a contingency plan, you’re leaving yourself and the business exposed to situations that are beyond your control. Though your business can survive periods without profits or sales, the business cannot survive without cash. Having cash reserves can guarantee that you can trade and develop your business effectively. Reluctance to seek advice from a professional can worsen any financial issues. A financial adviser or accountant is guaranteed to help you borrow and manage money wisely.
- SETTING UNREALISTIC GOALS
It is highly important to make realistic forecasts about the potential of your business. At the beginning of launching your business, making overly optimistic forecasts can be easy; however there can be serious consequences if your projections are unrealistic. An erroneous forecast of the market size is a usual mistake when starting up a business. If there are too many recruited people, or when there are too many recruited staff members, cash levels may easily decrease. Having an effective cash-flow and income forecasting can help avoid this situation.
- POOR PLANNING
Poor planning increases the chance of making more business mistakes, and may decrease the probability of reaching your goals. Coming up with a realistic and high-quality business plan is crucial since it will help secure external funding, anticipate issues, and will help set goals to address these.
- HIRING THE WRONG PEOPLE
A large portion of the success of your business will be determined by the quality of those you recruit. Ensuring that you hire people of high-caliber with the required skills may be a daunting task; however, if taken seriously, this process may highly improve your chances of success. There may be a number of risks involved in starting a business, yet avoiding these pitfalls and equipping yourself with the right knowledge can increase the odds that your business will survive and become successful in the near future.