Getting the legalities right in your small business can save you tens of thousands of…
The 5 Start-up Business Mistakes
There are really important things to know about owning a business that will make life a whole lot easier for you if you know them before you begin.
Being a business owner is not for everyone. And whilst from the outside it can look like a great option for lifestyle and high income, it most definitely is not either of these unless you have a great business model, produce heaps of value for your potential clients, and have a route to market that allows you to make a good margin/profit over and above what it costs you to make, sell and deliver your product to that market.
You will have heard that many businesses fail. In fact, the failure rate of businesses is high, but probably not as high as so-called experts would have you believe. But if they are going to fail, many business owners tend to fail early. Far fewer businesses fail after five years of operation and even less after ten years.
Why is this the case?
In this article, I’m going to share 5 mistakes that people make before they launch a new business.
1. Market opportunity isn’t real.
Many people make the mistake of thinking their idea has a bigger market opportunity than it really does. Getting prospects to become aware of your product; then trial it, and then continue to buy it is a whole lot tougher than it first appears and it isn’t always the case that the best product will win. In fact, the best product doesn’t get the biggest market share as often as you would think.
The product that wins the most market share may do so because it has the highest marketing spend, or because people are more connected to the brand for some reason, or for any number of hundreds of other reasons.
The mistake here is not that the individual thinks their product is best and therefore should get the best market share, but because the business owner relies on assumptions rather than facts.
The general rule is the more time spent in research and understanding the market, the higher the chance you have of succeeding. The overnight viral sensation is more likely to be luck or serendipity than the norm.
2. Financial foundations.
Many business owners believe their product or service will take off quicker than it does in reality. They underestimate the costs in launching and overestimate their sales results. They underestimate the production costs and overestimate the revenue.
As a result, they run into trouble with finances, not having identified the real amount of money that would be needed in the early stages to run their business. They also run into trouble with the taxman, by not putting aside enough for tax.
Apparently, the annual figure in Small Business defaults on tax bills is 26 billion dollars. In another statistic, our benchmarks of over 10,000 Small Business owners identify that 41% of businesses state cash flow is their #1 challenge in business.
3. Niche me, baby.
If you are just starting a business, you must identify and launch into a niche market. Far too many business owners try to be all things to all people. Unless you have some serious firepower behind you in terms of resources, you never enter a market with a new product and try and take the whole market. There will exist competition, some of which will be ‘big’ players, with lots of resources.
4. Location, location, location.
You will have no doubt heard this saying in real estate. Well, the same applies to business. This doesn’t mean the best, or the most expensive, or the most visible – it means the ‘right’ location for ‘your’ business.
Have you ever wondered how McDonald’s choose their locations? The research that goes into it would probably make your head spin. As part of your market research identify a good location for your business to operate from.
5. No plan, no hope.
In our benchmark of 1200 business owners in marketing, we have found that less than 15% have a proper marketing plan or correct estimate of the marketing effort needed to reach their goals. If you don’t have a business plan and a marketing plan, you basically are operating on an ad-hoc basis and have no hope of long-term survival. Don’t be like the 85%, be like the 15% who do and survive and prosper for the long term.
There you have five mistakes made by business owners during launch. There will be others, but not too many that can have such a huge impact on the chances of your survival in the first few years of operation.
Avoid them, and win.
“The opinions expressed by Smallville Contributors are their own, not those of www.smallville.com.au"
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