The moment when an employee decides they could run a company better than their employer is often the springboard for entrepreneurship. When the decision is taken to start up a new business there’s often an air of excitement and anticipation; but this is the time to stay grounded, however, as there are a few important things to remember if a new business is to make it through the first year as many start-ups do not.
Business planning
Failure to plan the business case for a new enterprise is likely to lead to disaster. Business plans do not need to be complex, long-winded documents – they can be relatively short and to the point, however they must contain information that is vital to ensuring success, and this includes a mission statement and plans for recruitment, marketing and financial management – plus an honest risk assessment. Business plan templates are available online, free to download, and it’s worth taking the time to work through a sample document before trading begins.
Start-up finance
Another common mistake is miscalculating the extent of start-up funding needed. Just because a bank offers a loan doesn’t mean it’s necessary to take on substantial debt, as interest on loan repayments could become crippling. The best strategy is to start on a modest basis with sufficient funds for essentials. Also, when trading it’s worth agreeing with a bank how much can be put on deposit for a fixed period, and how much will be needed for cash flow purposes. A Certificate of Deposit (CD) allows the bank to offer specific interest rates, and shopping around for banks offering the best business tips and advice, whilst determining CD interest rates, will result in finding the most suitable financial partner.
Market research
Many new businesses flounder because of failure to carry out an examination of the market for the proposed product or service. Even where business owners are confident that they have a distinctive article to sell or a captive customer base, it’s important to check out the competition and to remember that customers can always say ‘no.’ Identifying the unique selling point of a service or product can enable entrepreneurs to be precise about the scope of their marketing plan, and increase their chances of success.
Pricing
Always a tricky aspect to get right, some commercial ventures are launched offering cheap product prices that undercut rivals, on the basis that this will automatically attract customers. However customers want quality goods and are often prepared to pay a little more for them, plus people who are initially attracted by very low prices will be disappointed if these are unsustainable and charges have to be hiked. It’s better to settle on a sustainable, realistic pricing strategy from the beginning, and stick to it.
Flying solo
While it’s great to be the boss, some people try to do everything themselves – whether or not they have the right skills. This is a major error of judgment as very few individuals have expertise in every area, and it makes much more sense to focus on personal skills and work with others who have complementary competences, such as accountants. Running a new business is often hard work, however it should be rewarding and fun as well.
