The path that takes you from the first sparks of start-up inspiration to business success isn’t guaranteed to be a straightforward one. Setting up a new business can be hectic, and it can often be all too easy to look over or neglect important areas. To help you plan and avoid obvious mishaps, we’ve put together a list of some of the top mistakes new businesses make.
Not identifying your potential target markets
Whatever your business idea, considering whether the product or service you’ll be offering has a viable existing market is absolutely essential. In order to make sure your business will be financially viable, you’ll need to research who your potential customers might be, how large this group is and, perhaps most importantly, why they would be inclined to use your business. Without this information, you’ll have very little indication of how financially viable your enterprise idea is, meaning the chances of failure are higher.
Not finding out who the competition is
When you’re starting a business, it can be easy to get carried away with the services and product you’ll be offering. Many may find it hard to see any visible competition, viewing their ideas, services, or products as unique with no actual proof or sources of justification. The fact is, however innovative or special you view your product or services, competition will most likely exist, and ignoring this is another likely route to failure.
Competitor analysis ties in with target market analysis, and you should ask yourself a few questions about your business. Which companies does your target market use? Which of these offer similar services to your enterprise? How is what you’re offering distinct from your competitors? Why, when faced with multiple options, would a consumer choose you over any of your competitors?
Not analysing your weaknesses
As well as listing your strengths – why customers should use your service, what advantages your service has over competitors, how your service differs from the existing market – it’s of equal importance to list your weaknesses.
It can sometimes be difficult to see potential flaws or problems with your own business idea or service, which is why it’s often a good idea to seek impartial advice. This could be from a friend, a previous business partner, or even from a business adviser at a high street bank. Having a fresh set of eyes look at your enterprise idea could help reveal any areas that you may not have previously considered, allowing you to make necessary and important changes.
Writing an unrealistic business plan
After analysing your target market, competitors, strengths and weaknesses, you’ll need to write a business plan. This will detail what you set out to achieve, in terms of incomings, outgoings, growth and customer awareness.
However, it’s important to ensure that any business plan you write out is realistic. Setting goals that are too ambitious or unattainable can leave your business vulnerable should these not be reached, both financially and in reputation stakes. Again, not reaching your initial targets could also have a negative effect on your own confidence in your enterprise, as well as any other members of staff you employ.
In order to avoid this, it’s a good idea to set targets that you know you can achieve, and be realistic. Don’t make any huge plans for expansion, and don’t overestimate how much money your business is likely to make. Remember that starting out a business can often be a slow process, and it may take time for the profits you’d like to see to be made.
Dismissing outside funding opportunities
Not seeking outside funding, and attempting to fund a business out of your own pocket or on predicted profits can leave your business on shaky ground. Although you may have done your best to plan your incomings and outgoings, there’s always the risk that this forecast may not come into fruition, leaving you and your business in a tricky financial situation.
For this reason, looking for outside sources of funding should always be considered. Whether it’s a commercial mortgage to help finance the purchase of property, a loan from a high street bank, or money earned via an online crowdfunding campaign, many opportunities exist for new businesses to find extra sources of capital. You never know what might happen in the future, so having that little extra source of money to fall back on shouldn’t be dismissed.
Registering the wrong type of company
Presuming your business plan is viable, you have a valid target consumer base, and you have the necessary funding, you’ll need to register your company. When doing this, you’ll be given the option of registering as a sole trader, partnership, or limited company, each of which have very different implications for your company.
For example, registering as a sole trader means that you alone will be responsible for the entire business. This means that in the eventuality your business incurred unpayable debt, your own property could be seized to cover this. Registering as a partnership means this responsibility is shared amongst any named partners, as are tax obligations. Meanwhile, having a limited company status on your business means that profits and debts are linked to the company rather than any one person, meaning your personal finances will not be affected should the enterprise enter into financial difficulties, unless you have given a personal guarantee to secure any funding
Based on this, when registering you’ll need to consider exactly what kinds of responsibilities you’re willing to sign yourself up for. If you’re unsure, seeking advice from a business consultant is advisable.
Starting a business can be an exciting time, but it’s important to remember not to become too overconfident or overzealous in your planning. However, considering all eventualities, seeking outside help, and picking through your finances with a fine toothed comb should ensure your business idea is solid, viable, and mistake free from the outset.