It's a sobering statistic, but around 80 percent of new business start-ups are destined to fail. The specific reasons for such a high mortality rate vary from business to business, but there are a handful of key mistakes common to many new business owners. Avoid these and your business stands a much greater chance of survival.
1. Lack of research
You may think your business idea is bound to succeed, but it's essential to do some detailed research to back up your instinct:
- Do you really understand what your product is?
- Is there a market for your product or service?
- Will people be prepared to pay what you want?
- What competition is out there?
- Is there a sufficient infrastructure to support your business? Is it seasonal?
- How will you survive lean periods?
Unless you research your market thoroughly, it will be impossible to know whether your business is viable or not.
2. Failure to plan
There are two key areas in which all new businesses must plan:
- First, you need a comprehensive and realistic business plan:
- Ask your accountant when putting this together - he or she will be objective and help you to set targets that are achievable.
- Building goals into your plan will help you measure how the business is performing so you can react accordingly.
- Second, draw up a proactive marketing plan:
- Many new businesses are too passive when it comes to marketing their products.
- It's not enough to design a website and wait for the orders to flood in.
- Marketing should be multidisciplinary and exploit all forms of delivery, whether mail shots, email, or newspaper and magazine advertising.
- You need to keep driving your message and USPs by whatever means.
3. Looking after cashflow
Cash is king - it's a fact of business life: you need to manage your cashflow and that takes planning. Your accountant will help you to devise systems in order to help you:
- Stay on top of your debtors and collect in cash.
- Monitor your outgoings and not overspend
- Set budgets so you can plan for lean times
- Put aside sufficient funds for taxes and other unforeseen expenses.
4. Insufficient systems and processes
Many start-ups fail not because the product is poor but because the business is inefficient. This is where it can really help to bring in an accountant to help delegate some of the aspects that are not always intuitive to a new business owner.
- Implementing appropriate systems and processes in areas such as bookkeeping, stock control, and time management, will help your business run smoothly, allowing you to spend time growing order books instead of firefighting niggling issues.
- Robust accounting systems provide you with measureable data and information that will help you to make the right decisions and keep your business on track.
5. Failure to react
We live in a dynamic world and business environments are constantly changing due to social and technological changes.
- Business models that were once successful are no longer thriving.
- If your business is to succeed you need to innovate and move with the times.
- Stay one step ahead of the competition and be prepare to react to new challenges and potential opportunities.
There are hundreds of potential business pitfalls, but if you avoid making the five mistakes outlined here you'll have sidestepped some of the major causes for business failure.