Four things you MUST consider before starting a business
Thinking about starting a business? Read the four things you need to know – and avoid being one of the 50% of start-ups that fail in the first two years.
According former Dragon Theo Paphitis, 50% of start-ups fail within the first two years. Pretty depressing statistics, but that doesn’t mean your new business has to be one of them. (Put another way, 50% of start-ups are still going after two years!)
If you want to give your business a fighting chance of making it past the all-important two year mark, business writer Patrick Vernon shares four things you need to know.
1) Plan carefully
Starting a business isn’t for the faint-hearted. Entrepreneurs need to be mentally and physically strong – when you work for yourself, sick pay and paid holidays will become a thing of the past, and time out with your family a luxury. You can also kiss goodbye to the security of a regular, reliable income.
Given this, you can’t afford to ‘wing it’ when you launch a new business, especially if you have a family to support. So careful planning becomes even more important.
The British Enterprise Support website has some constructive advice about how your start up can succeed. The website suggests that you can never carry out too much preparation and research. So before you gleefully hand in your notice to your day job, make sure that you’ve developed a first-class business plan – and avoid these 10 common mistakes.
Also, make sure you have enough savings to cope with that scourge of the SME – the late invoice payment. According to the Federation of Small Businesses, 73% of all small businesses reported late payments as a major problem.
Read advice on how to set up a solid credit control strategy, and find out what to do when a client doesn’t pay your invoice.
2) Research your market
According to Theo Paphitis, one of the reasons so many start-ups fail is that they’re unrealistic, and don’t take global production costs, transport expenses or failure into account.
Many companies can fail, but the ability to bounce back is what’s important. Paphitis suggests that “People haven’t done their research, they don’t know where to go for the right funding.” (Organisations like Virgin Start-Up offer businesses not just that all-important investment, but valuable mentoring and business support too.)
Paphitis also recommends that fledgling start-ups take lessons from market successes and see how these models can apply to their own businesses.
Bear in mind the expression ‘Know thine enemy’ and watch what your competition are up to. What are they doing well? What can you learn from? And what mistakes are they making or opportunities they are missing?
And it’s not just other businesses you can learn from. Before you launch any new enterprise you should conduct some kind of market research, and find out what your potential customers want and will pay for.
It’s easy to do – if your business is local, stand on the street and stop your ideal customers and ask them some quick questions. If you know people who fit your target audience profile, ask them. Or set up a quick, free online survey using services like Survey Monkey and share the link online.
3) Expand with care
It’s very tempting, once you feel you’ve conquered one market to race into another. But proceed with caution. Just because your idea and processes worked well in one market, doesn’t mean it’s a shoe-in everywhere.
For example, many start-ups make the mistake of believing that within a few months of domestic success they are secure enough to trade overseas, but that’s not always the case. The global marketplace is fickle, and a business model that works perfectly well in the UK might collapse once you venture overseas.
For a start, coping with all the legal niceties, business customs and other essentials of international trading that you’ll discover once you dip your toe in the overseas commercial pool might prove more difficult than you think. Just think of the invoice delays, language problems and other hiccups that you can encounter.
So if you do decide to venture beyond the UK, make sure you’ve got robust legal advice and access to high quality business translators (like London-based Vanner Perez Notaries who translate and legalise commercial documents).
4) It’s all down to you
You can have the most brilliant product or service in the world. You can have a perfect business plan, and invest thousands in marketing and branding. But there’s one essential element that no business in the world can succeed without – and that’s you.
Behind every wise business decision, every clever new product, every well-planned marketing strategy is you. You’re the heart, soul and engine of your business, and if you don’t have the right attitude and self-belief, and if you don’t take care of yourself, your business won’t work.
Too many otherwise-successful businesses founder (falling into that 50% of start-up failures) because the person behind them didn’t have the self-belief and determination to ride through the dark days (and possibly weeks) where you work day and night for seemingly nothing. They didn’t have the instinct or determination to overcome the inevitable obstacles. And they lacked the confidence and vision to make the right decisions.
So if you want a successful business then yes, plan carefully, research your market and expand with care. But more than all that, make sure YOU are ready to run a business, that you have the confidence and self-belief to push it on. And that you take care of yourself, and don’t burn out with over-work.
Read these before you start your business
Before you even start a business plan, we recommend you read these articles and get yourself business-ready, and on track to be one of the 50% of start-ups who DO make it past two years: