Outlined below are 7 start-up mistakes to avoid at all costs:
1) Lack of planning
Like many things in life, planning helps to achieve goals and business is no different. Business planning is a key factor in business success. If you need finance, no bank manager will lend money without a considered plan. Additionally, a business plan is also much more than just a fundraising tool and can help you set clear objectives and clarify your thinking, monitor performance, provide early warning signs and potentially be used as part of the recruitment process to attract talented employees.
Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.
2) Wasted marketing spend
Be careful with what you are spending on marketing. Make sure you set out a clear budget and work out what marketing communications need to be prioritised. For example, in the digital age, a company’s website is increasingly becoming the first point-of-contact for a prospective customer; it is essential you send the right message. Additionally, the use of social media platforms e.g. Twitter, Facebook, LinkedIn, Google+ etc. are a quick, easy and free way of getting your business in the public eye.
Details of your marketing activity and budget are an important aspect of any business plan.
3) Badly targeted marketing
Set out a communications plan with specific objectives that you want to achieve.
If you are spending the time and effort to set out a clear marketing budget and communications plan, ensure that you set objectives that are ‘SMART – Specific – Measurable – Achievable – Realistic – Timely’ and that your time is not wasted.
Making your marketing SMART will ensure you are targeting your specific market in a timely fashion. It will also enable you to measure your progress, which can allow you to pull out of or intensify a marketing campaign, depending on its progress and also plan more effectively for future marketing. For example, if you have seen stronger end-results from direct marketing as opposed to on social media, you may wish to concentrate more on your direct marketing communications in the future.
Google Analytics is a fantastic tool which can help you measure progress: http://www.google.com/analytics/
4) Poor recruitment
Make sure you employ the right personnel from the off-set. You must take into account that how your staff communicate and behave will have an impact on your company’s image and reputation. This is especially important for the customer service sector.
Also, when employing family and friends, it is important you consider the potential ramifications on the business and other employees. Take into account the wage a family member earns, as paying a family member what they need rather than what they are worth may lead to tension and resentment among non-family employees. Additionally, from our experience, when a family gets into relationship conflict what usually happens is that the root of the problem is ignored and instead the focus is shifted to ‘business symptoms’. Being aware of this beforehand can mitigate potential issues.
5) Inadequate research
Do not underestimate the importance of planning and research. These are pivotal tasks an entrepreneur must take in order to ensure the viability of a business idea.
Questions to ask yourself:
- Is there genuine demand for what I am selling?
- What price should I sell at? What price does the market demand?
- How can I sustain a long-term competitive advantage? Do I have a USP?
To answer these questions, it is important to conduct both primary and secondary research. Primary research is fundamental; meet with your potential customers, customers of rival products and find out what the market demands – then tailor your business accordingly.
Be prudent. Be prudent with your financial forecasting and be prudent with your spending.
Firstly, when projecting your financial information (Profit & loss accounts; cash-flow and balance sheets) make sure you do not overestimate your business’ potential. If you are pitching these forecasts to potential investors, having an unrealistic outlook may put them off – it can show your inexperience of the market place. It can also cause problems down the line if you do not meet goals and hit the financial targets you projected. It is a good idea to include a sensitivity analysis in your financial forecasting – include the figures your business may achieve if your projected sales figures were either 10% or 20% up or down. This will show investors you understand the market and will help you determine worst/best case scenarios.
Secondly, in regards to cash- flow, be prudent on how much you are spending and what you are spending it on. It may be tempting to invest in stock, equipment and hire more staff than necessary, especially if you have had a cash injection from an investor. Keep money aside as a contingency plan; you never know when you may need to replace a piece of equipment or you have a cash-flow problem.
Writing a business plan can have many benefits, but please bear in mind that things do not always go as planned. You need to be flexible with your approach. This may mean bringing out a new product, changing a marketing campaign or something more drastic, like changing your entire company’s direction.
Did you know that Lucozade was first sold as a medical drink and not a sports drink or that Nokia, the telecommunications giant used to make rubber boots?
These companies saw an opportunity in the market and changed their direction.
Do not change for the sake of change, but if there is a viable opportunity, it may pay to take it. This doesn’t have to be on the same level as Lucozade and Nokia, not at all – the market is much more competitive now. However, as an example: if you are a clothing retailer and it starts raining, why not place your umbrellas by the door or near the till or if you offer data protection software and there is a recent breach in the market, why not intensify your communications?
Ian Bryan heads up the firm's Business Services Department, which is dedicated to helping the smaller business. Ian acts for a wide range of sole traders, partnerships, and limited companies providing accounting and tax advice and practical business solutions. For more details and advice, please contact Ian on [email protected] or 0114 266 7141.