Start-up businesses can fail for a large number of reasons. It goes without saying that the fewer mistakes made the less likely failure will occur. People provide many tips on how to start businesses successfully but perhaps it would be easier to actually look at what not to do. By overcoming the below common mistakes you will give yourself every possibility to launch a successful business.
1) Capital: Lack of funds can be a major obstacle in starting your own business. It is hugely important to launch your business with the right amount of money. Starting with too little cash is not advised and can be a big mistake. If seeking investment be realistic in terms of the amount required, the money should be enough to at least take you to the next step of the business plan, whatever that may be. Typically this may be simply building a prototype. Money must be carefully managed in its early stages, and start-up companies must look for the most attractive deals from suppliers.
It is now cheaper than ever to start a business with many online companies expanding from a simple website. One early expense that can be avoided is the immediate hiring of staff. It is not suggested to hire staff in abundance before the business has really taken off. If you do require help perhaps look to friends, or family, however if hiring someone is unavoidable look into paying them in equity as opposed to salary. Believe it or not it is also possible to raise too much money.
Changing the direction of a business may be needed in the early stages and if there has been a significant financial commitment, changing the business direction may be very difficult. Looking for huge investments is also time consuming and may delay the launch of the product or service.
2) Timing of the launch: Getting the timing of the launch of the business wrong is another common mistake for start-up businesses. Launching too slowly is possibly more damaging than launching too quickly. If the launch is delayed you run the risk of another start-up business introducing a similar or identical business concept. Some common delays for not launching on time include working too slowly, not truly understanding your target audience, working on too many different projects, and the fear of actually having to deal with the users of the product or service.
On the other hand launching too early may ruin the reputation and may discourage people to ever use the product or service again. Getting the timing right is crucial to early success.
3) Relying heavily on one supplier: This is particularly important during times of recession. With the huge number of businesses closing down, relying on one supplier only is a silly mistake for a start-up business. Let’s assume a company is starting up and uses one supplier to source their raw materials.
They may have favourable terms of trade with this supplier and the supplier may understand what exactly the company requires, however if this company goes sunder so does the start – up in question. It is recommended to have a variety of suppliers to lessen the risk involved.
For business to business start-ups it is advised to have a number of different customers. If you only have one major customer and that business fails you too will be in serious trouble. Starting a business is in itself a massive risk so any opportunity to minimise risk is advised for small businesses.
4) Not identifying a specific user: Having a great innovative product or service is not enough. You cannot adopt the attitude of “people will like this”. You must ask yourself who will like this and who will purchase this. A clear target audience must be identified. Start-ups that are unsure about their target audience are far more likely to fail. All future marketing efforts should be aimed at your specific users. These people need to be understood in quite some detail.
5) Not being fully committed: Many entrepreneurs looking to start new businesses have other business interests and are often employed elsewhere. Some talented entrepreneurs have the ability to manage a number of their businesses simultaneously however for most people this proves to be a very difficult task.
Statistics show that many founders of failed start-ups have other jobs and have not devoted their full attention to the new business venture. If you want your business to be really successful other work commitments must be questioned.
If you are happy to just try your hand at starting a business and are not overly concerned about whether or not it fails well then I would recommend hanging onto your day job.