When launching a small business, it can be tricky and risky. Success is not always, of course, guaranteed. Businesses are most likely to fail during the first years of trading, and up to 20% of new businesses collapse and fold, sadly, within their first year, and up to 50% of businesses become defunct within their first 3 years.
These figures shouldn’t put you off from starting a business, but they should prepare you for a lot of the challenges that entrepreneurs face when beginning. Of course, with hard work and a good, strong awareness of the issues surrounding startups, a new business can prove to be a great success.
A lot of research and different types of planning are vital to ensure that your business idea is going to work and that the prices you offer are going to competitive and provide a good quantity of cash return for you.
One of the most common misconceptions is that entrepreneurs who have failed with their business, lacked funding or did not have the right team and employees in place. However, many fail because they have generally, and simply, have not spent enough time doing quality research.
It is extremely important to make realistic and honest forecasts about the potential of your business. During the startup phase, it can be easy to make over-optimistic forecasts, but there can be serious consequences for your business if your projections are not realistic and don’t add up.
Common mistakes for new businesses include setting up unsatisfactory credit arrangements and not taking enough care when choosing suppliers. Choose carefully as your business’ profitability and reputation could be at stake. If struggling, you can get legal issues resolved in a practical and cost efficient manner.
Another reason why businesses fail is poor stock control and over-investment in fixed assets. This can mean your capital is tied up unnecessarily, and can cause problems. Efficient and solid stock control will mean you have the right amount of stock in the right place at the right time. You will therefore not be losing money, but staying at a neutral level. You will also need to put accessible and good systems in place to keep track of stock levels and how it is affecting your cash flow. Taking control of this aspect yourself will allow you to free up well-needed cash, while also allowing you to have the right amount of stock on hand.
A large part of your success will be determined by the quality of your employees. Hiring people always means some form of investment and it requires careful consideration. Taking this sort of investment seriously can make your decision more valuable and improve your business’ chances of success. Ensuring that you hire the right people with the right mix of skills is not easy process but it will eventually pay off. How you go about employing new people is up to you, and will obviously depend on your business needs, like whether the work is constant, and the number of hours available.