Tackling Business Start-up Problems
Sema Fongod of Invoicediscounting.uk.com identifies the key challenges faced by new companies and potential solutions to each.
Starting a business can be an exhilarating yet intimidating challenge. Hundreds of new businesses are started every other day across a range of industries.
However, the dissatisfying fact is that start-up businesses have a very high failure rate, with as many as 1 in 3 failing in their first three years – one of the main reasons being poor planning or a total lack of it.
Behind every successful business came a handful of errors so do not be put off if your small business is experiencing a downturn in its initial years. Identifying the start-up challenges is one thing; but coming up with contingency measures will increase your odds for success.
Having 100% confidence in your business idea and plan doesn’t guarantee commercial success in the long term. Recent research reveals that most businesses fail due to poor decisions by the owner(s). Others fail because of external conditions such as a regressive economy.
Do not let your excitement of starting a business overrule the basic homework – conducting primordial market research. Here are some common pitfalls that you should be aware of:
Securing finance is one of the toughest challenges faced by new business owners. If you’re raising finance for a start-up – whether from a bank or business angel – you’ll most certainly need a business plan. Banks and credit agencies would be wary of lending to new companies as they are less likely to have any credit history – lending against cashflow projections rather than historical information.
The other major concern for new business owners is having the right working capital to cover the business once it starts to trade. You must have adequate funds to cover start-up costs and reduce any outstanding debt. Insufficient cash could prevent your business from grabbing early vendor opportunities and discounts.
Many vendors are wary of extending credit to start-ups and usually require up-front payment for delivery. Alternative business loans such as factoring could be an effective working capital solution for companies with outstanding debt.
Little or no marketing
As a start-up, how do you reach out to your market? – The obvious answer to this is targeted marketing. A common mistake many start-up owners make is to engage in marketing commercials without full knowledge of their target market and business environment. The costs associated with advertising and promotion can be steep, so it may be irrelevant and costly to engage in radio commercials, print ads and banners for an untargeted audience.
Create a marketing strategy or plan that identifies potential customers, reviews the market environment and presents your unique selling proposition to the potential prospects. Remember that customers are the main source of income; hence every marketing move has to be centred on them.
In addition, if you do not have a website, then this might be your most lucrative investment. A basic website will do at the start, allowing customers to view your products and place orders online. In addition, this might be the time to create your new business’ profile on social media websites such as Facebook, LinkedIn and Twitter.
This is not just about paying an accountant or other personnel to prepare your business plan. It’s also about anticipating the issues and complications associated with starting a business and having the right measures in place to deal with them. Proper planning gives you the opportunity to analyse your business idea and how to execute it.
Another challenge faced by new business owners is hiring and firing employees. Many believe that initially, they may not require full-time employees and can run the firm’s operations by themselves. Though this may be a cost-effective solution in the short term, your business might be exposed to common mistakes. It’s advisable to have at least three employees – an attorney, a qualified accountant and a team mate such as a secretary as they can provide insights into the operation of the business. As the start-up expands, you can hire more staff accordingly.
Thrust from established competition
Every start-up is bound to experience pressure from the ‘big name’ companies within the industry. Do not be intimidated by that. Remember that every successful business started from somewhere. It may be difficult to obtain products at ground-level prices and benefit from supplier offers as your competition does, but there are other sides to the success coin. You can decide to charge fairer prices and ensure that your customers get quality service.