Starting a business can be both an exciting and daunting challenge.
When your mind is buzzing with all sorts of new ideas, it’s easy to get caught up on the wrong things and overlook the important things. In this article, we share five mistakes to avoid as a new start up.
1. Not validating the business idea
Businesses only work when people are willing to part with money for the thing you are selling.
Too many start-ups get caught up in an idea, and fail to think through its viability as a business.
A great place to start in validating your business idea, is to ask yourself two questions.
Firstly, is there a gap in the market?
Is there a problem you can solve that isn’t being solved by existing businesses? Is the demand for a solution outstripping supply?
Second, is there a market in the gap?
Have the people with that problem got money that they are willing to part with to solve it?
Are there enough people ticking these boxes to base a business around?
If the answer to all these is yes, you might well have a viable start-up business. But it’s still worth doing some market research before you invest too much money. Get out there and talk to your ideal customers to find out if it’s something they want and need.
2. Scaling too quickly
When you believe in your business and its success, it can be tempting to invest a lot up front to grow rapidly.
Putting money into stock, premises, staff, marketing or business assets can feel like the right thing to do at the time. But, you could be creating commitments you can’t keep to.
Businesses need to be built upon solid foundations, so it’s vital to establish steady cash flow and strong systems underpinning your business before you make significant commitments.
3. Undercapitalisation
Almost every business will require some form of cash injection at the start. It’s not unusual to operate on a loss for a period of time before the profit starts rolling in.
Therefore, it’s vital to ensure that you have enough money to cover your start-up costs, and a buffer to cover any unexpected setbacks.
No business, of any age, is immune to these setbacks. So, keeping a little money earmarked for a ‘rainy day’ can be the difference between success and failure in the long term.
4. Ignoring hidden costs
Business finances are never as straightforward as money in vs money out. Keeping on top of hidden costs can feel like a game of whack-a-mole.
It’s not uncommon for new business owners to reach the end of the year having spent all their capital without considering how they will pay their tax bill.
Insurance might seem inconsequential as a monthly outgoing, but it soon adds up over time. Feeling squeezed for customers? Maybe you need to invest in some extra marketing this month. Compliance fees, mandatory CPD, software licensing, data security, legal fees… the list of potential outgoings is endless.
A thorough business plan should factor as many of these as possible. But it’s inevitable that there will be a few you haven’t accounted for, especially if you’re new to business.
Hiring an experienced, professional business adviser, like Buckler Spencer, who knows the kinds of the costs you’re likely to incur in your business can save you money further down the road.
5. Not seeking advice
It’s a commonly held belief among new business owners that they can and should go it alone.
As the expert in your field and founder of your business, reaching out for help, advice and mentorship can feel like a big, potentially vulnerable step.
At Buckler Spencer, we can’t claim to be experts in your field. But we are experts in how to run financially-secure, well-planned businesses, with specialist knowledge of our local area.
We listen carefully to your vision and help you to ensure that you’ve dotted every I and crossed every T when it comes to your business plan and financials.
With a wealth of experience across different sectors, and an in-depth knowledge of Swadlincote and the surrounding area, we have a broad awareness of the kinds of costs you should be considering and the clients you’ll be catering to.
We’re passionate about helping to support successful local businesses that make an impact on our area and beyond and want to see you succeed.
Seeking help early on can prevent any nasty surprises from turning up later when you least expect it.
So, if you’re in the early stages of business, or thinking of starting one, why not get in touch with the team at Buckler Spencer to see how we can help to support your start-up business?