Common Problems of Starting a New Business
If you are thinking of starting a new business take care to avoid the following business mistakes.
Each year many people start their own home based business, but many of them won’t even reach their second year. In many cases, this is due to incorrect planning and could have been prevented even before the business started. Don’t make the same mistake and jump on the home business boat without considering solutions to the following common problems of starting a new business.
No Financial Plan
While you may not need a fully-fledged business plan in order to start your new business, you still need to know exactly how much money you’ll need and when you’ll need it. You will need a financial plan in order to plan how to pay your suppliers and generate enough money to pay your own salary. Many small businesses fail because their cash flow management doesn’t take into account things such as clients taking up to 3 months to settle invoices, business and staff taxes, payment fees or a myriad other expenses that may not be obvious at first sight. If you are looking at ways to raise money to start a business your financial plan will be part of a more complete business plan you can show investors or banks.
Not Enough Market Research
Before attempting to sell anything you need to make sure that there are enough people willing to buy it from you at a price that allows you to make a profit. Even if you think that your idea is unique and solves a popular problem, you should research how many people are willing to pay for that solution. Consider other factors that may stop people purchasing from you, even if you are the only supplier, such as lack of awareness about the product or lack of trust on a new, unproven company, and estimate how much time and money it will cost you to get them to buy. These kinds of costs related to bringing a new product to the market are often forgotten by inexperienced entrepreneurs, and cause many businesses to fail. If you are unsure about a product viability consider joining affiliate money making schemes on the niche to evaluate your ability to create leads.
No Contingency Plan in Place
So you have a great product, and the founding and financial plan required to bring it to the market. Your market audience is happy and ready to buy it. And then your supplier closes shop due to a natural disaster, or raises its prices. Or a new set of regulations means you need to invest in costly certifications or products to keep your business running. And your business suffers from it. A contingency plan identifying which are the key risk factors affecting your enterprise and how to go about reacting to them can be key to keeping your business afloat while you find a new supplier or adapt your products or website to new regulations.
This is a costly mistake that causes many small businesses to fail during their first year, but it’s often associated with the other ones already mentioned. Pricing your products and services can be a big challenge. Too high, and nobody buys. Too low, and you’ll be working for barely nothing and will have to close shop due to lack of revenue. If you have a financial plan in place you can more easily evaluate how much it takes you in terms of time and resources to produce a particular product or deliver a service, and you can use that to set your prices. Market research will tell you if there’s actually a demand that would pay that price. And a contingency plan would elaborate on how to reduce your costs or market your product in order to get sales even if your pricing is not so competitive.
If you avoid those small business mistakes and prepare well from the start your chances of success will be much higher. While many people consider successful businessmen just lucky, in many cases their luck is due to careful planning and evaluation of their circumstances and the validity of their business idea.