Start-ups stumble on simple stuff
Starting a business can be a dream come true or a nightmare. But entrepreneurs can prevent sleepless nights by avoiding common mistakes right at the beginning.
Surprisingly, one of the most frequent errors among start-ups is the owners are unclear about what exactly they intend to sell to potential customers - and how to sell it.
Here's a quick roundup of the critical considerations in those early days.
What you sell: Before you start a business, you need to have a clear vision of what you are trying to achieve in the marketplace. Determine what value you propose to add that will entice a potential purchaser to buy your goods or service.
For example, one individual was terminated from his job as a tool and die maker. He immediately started his own business. It failed within a short time because the service he was offering - making tools and dies - was no different than that of his former employer. Buyers preferred the security of dealing with an established enterprise to taking a chance on a start up.
It is important to define what you feel your potential customers need, then ask them to confirm it. Find out what price they would be willing to pay if you satisfied their needs. Once you clearly have this information, start your business.
Sales cycles: Many failures occur because the new business operator does not fully understand the entire selling process. For example, selling to large organizations requires building a relationship with potential buyers. These individuals are tied to a budget that has been approved by their bosses. They often have existing vendors that they have been dealing with for years. Even if they want to try you out, it can take up to 18 months to put you into their purchasing and budgeting cycles. Most likely, someone else will have taken over their job by the time you come to the top of the list.
You can shorten a sales cycle by providing goods or services that the prospect needs immediately. For example, one owner started a business to produce high quality leather goods. A potential customer had an urgent need for some vinyl goods. He took the order produced the goods on time and has watched his business grow dramatically ever since.
Administrative issues: Administration is something that every business owner tries to avoid as much as possible. Administration issues will take up about 15 to 25 per cent of your time, and not allowing for it can be costly. For example, not filing government forms and payroll deductions in on time will cost a great deal of money in penalties and interest. Not maintaining your accounting records at least monthly can result in a lack of awareness of what is actually happening in your business.
If you are not good at administration, hire an accounting firm on a monthly retainer to provide these services for you. The price you pay will be easily recovered with the time you will have free to sell more of your product .and your piece of mind.
Financing: Before starting your business, you need to prepare a plan that will give you a picture of the money you expect to receive, what you plan to spend and when. This will tell you how much money you need to borrow or take from your savings to finance the business. If your plan calls for $10,000, expect that the real number will be $30,000. Always have your plan reviewed by your accountant before starting.
Family conflicts: Starting a new business is very stressful. Your stress will be exacerbated if you and your family are not in agreement on this venture as a course of action. For example, if your spouse is opposed to you trying to fulfill your dream and wants you to work in a "safe" corporate job with lots of benefits, your business is likely to fail. You will need the support and encouragement of your whole family.
Published September 28, 1998
Disclaimer: This website contains the opinions and ideas of its authors and is designed to provide useful advice in regard to the subject matter covered. The author and publisher are not engaged in rendering legal, accounting, or other professional services in this website. This website is not intended to provide a basis for action in particular circumstances without consideration by a competent professional. The authors and publisher expressly disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this website.