Starting a new business is a daunting step. Here are the seven expensive mistakes that every start up needs to avoid
1) Failing to manage your cash
It’s a well known fact that many new business fail due to lack of cash even when their p&l looks healthy. As a start up it will be a while before your revenue outstrips your costs. Is essential to work through a financial plan to ensure you have enough reserves to take you to profitability. Once you have worked out how long it will take make sure you have a buffer in case it takes longer than you originally anticipate – plan for the unexpected.
Even as your business grows and becomes profitable never take your eye off your cash. Make sure you chase up revenue as it’s due and resist the temptation to pay suppliers before the due date, just to “get it out of the way”. Almost all banks will allow you to schedule payments so you can still clear your to do list without paying early.
2) Thinking you’ll be an overnight success
It will take you longer than you think to become profitable. It’s essential to make sure you have the finances and the fortitude to tide you through those early weeks and months.
3) Failing to get feedback
Your business idea is no good without customers willing and able to buy what you have to offer. There are many reasons why you might be reluctant to get feedback – worried someone is going to steal your idea, you think your idea is perfect just the way it is or it’s nagging insecurity holding you back. None of these are good reasons not to get feedback! Your business will succeed because you execute it really well, not because no one has thought of it before (there really aren’t many truly original ideas any more just more innovative ways to meet a need). Your idea needs air to make sure you are addressing a genuine need and you are delivering it in a compelling way to your customers. Don’t waste money by going down a dead end and needing to start again.
4) Not maintaining an updated contact database
As you get started you will meet a lot of people, people who you will ask for advice, people who may become customers and people who may even become partners later down the line. Some of these people will provide you with vital introductions that will help your business take its next leap. Make sure you keep a complete and updated database of who you’ve met and make sure you keep in contact. Make sure you follow up on all those early meetings no matter how tenuous they may initially seem. I’ve met a number of clients through introductions from people I really wasn’t expecting to be able to help me.
5) Spending money on things you don’t need
I know that nice, shiny MacBook Air looks tempting and wouldn’t it be great to kit your home office out with a whole new set of furniture….but do you need to……? There will be plenty of things you need to spend on as you start up so spend smart and bootstrap your business.
6) Skimping on professional advice
The key areas not to skimp are tax, legal advice and financial advice. They can be the most expensive mistakes to unravel. Not spending up front only means you’ll pay for it later.
7) Not having a clear sense of your where you are going
Make sure you set goals for your business at the start. You need to have a roadmap so that you can make the most effective use of your resources (time and money) and ensure you stay on the path to business success.
Have you committed any of the seven deadly sins?