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New business mistakes

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How to avoid the common pitfalls

Starting up your own business can be an exciting, but also a complicated, period. It’s important that you get everything right in the beginning, as mistakes can lead to major issues with the business. It doesn’t matter how prepared you are, people will always make mistakes. However, here are six ways to avoid making the most common errors.

Have a business plan

It’s not just enough to have the ambition to succeed; you also have to have the plan to match. Putting together a solid business plan will set your company off in the right direction and ensure you focus on the important elements. Research the market, so that you understand your competitors and how you fit in. You need to know exactly who your customers are in order to target them effectively. By having a good plan, you’ll also be able to keep an eye on your budget and ensure you’re spending in the right areas.

Be realistic

Often new businesses start with great ambitions of how dominant they’re going to be in the market. However, it’s important to have a realistic plan, so you don’t get ahead of yourself. Think about the forecasts you’re making, especially if they relate to finances, and don’t be too optimistic. Consider the market potential, as this will affect the amount of stock you buy and the number of employees you hire. If you get this wrong, you could have stock lying around and staff not doing anything. Don’t push for too many sales in the beginning and forget about making a profit. If you try and service too many customers at once, you might find you run out of resources and end up not providing a good service.

Sell at the right price

You might want to appeal to new customers, but marketing your products and services too low can be just as disastrous as setting a price that’s too high. If it’s too cheap then you won’t make enough profit on each unit. However, by having them too expensive you won’t appeal to enough people to sell the right amount. Make sure that you research what else is available, how much your competitors are charging and the price your customers are willing to pay. When setting your price, take all your costs into account, including rent and staff, and decide on how much profit you want to make.

Don’t forget the marketing

It’s important with a start up business to have some budget set aside for marketing. Often this is seen as an after thought, but it’s actually an essential component of starting a business. If you want customers to buy your products, then they need to know that you’re there in the first place; this is where marketing comes into play. If it’s not an area that you’re experienced in, it might be worth hiring a consultant or reading up on the area.

Keep an eye on the budget

business mistakesOften new businesses fail simply because they’ve run out of money. This can easily be averted by understanding your budget and maintaining a healthy cashflow. Businesses can get carried away at the start, spending too much money on office space, furniture and staffing. You need to consider what’s vital to get your business up and running and often this is simply you working from home. By spending less on overheads, you can afford to invest more in the business, including stock and marketing. When they’re starting a business, people often imagine that invoices will be paid quickly, but this isn’t always the case. It’s vital that you have a good cashflow to see you through the first few months. This includes having a contingency budget in case things take longer than expected.

Manage your debt

If you can avoid doing so, it’s best to start a business with minimal debts. By having a large loan hanging over your head at the beginning, it will put more pressure on you to be successful straight away. Instead of focussing on developing the business and servicing clients, you’ll be more concerned about making loan repayments. If it’s possible, having sufficient savings to start a new business is the best option. It could be a while before you make a healthy profit, so it’s important to think about how much money you’ll need to survive, both for the business and personally.

With 20% of new businesses failing in their first year and 50% within three years, it’s important that you know exactly what you’re doing. Starting a business isn’t easy, but if done correctly it can leave you with a highly profitable and rewarding company.

 

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About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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