The benefits of starting your own business are undoubtedly attractive, but research by the Telegraph newspaper found that a third of small businesses fail within the first year. Time and time again, new business owners fall prey to the same common pitfalls. Here are 5 money traps to avoid so you can set your business up for lasting success.
1. A Lack of Planning
Former US President Dwight D. Eisenhower famously said, “Plans are worthless, but planning is everything.”
While plans alone won’t make you money, it’s essential to create a careful and realistic plan for your business. Without one, your chances of success are very slim.
Running a business is a journey, and therefore, you need a map to guide you. Starting a business is exciting, and it’s tempting to jump straight in, but you have to take the time to plan first. An ad hoc approach very rarely works.
First, you must define your company and get clear on your ideal client. You also need to create a realistic business budget and set short, medium, and long-term goals to pace and motivate you.
2. Neglecting Marketing
If you don’t focus on marketing now, you’ll wonder why you don’t have any customers later. You need to market your business consistently from the beginning and create an engaging brand that appeals to your ideal customer. Your company might offer a fantastic product or service, but you’ll struggle to make money if no one even knows who you are.
Furthermore, you need to get your marketing right, which means identifying your ideal client or customer and curating a careful strategy that will speak directly to them.
There are three main factors you need to get right:
- Audience – you need to speak to the right group of people.
- Offer – you need to create an appealing offer for this audience.
- Message – you need to send the right message about your offer to your audience.
There’s much more to marketing than publishing a few Facebook posts or taking out an advert in the local newspaper. You need to put time, effort, and careful thought into your strategy, or you’re in danger of missing the mark.
3. Cost-Based Hiring
Ever heard the phrase “you get what you pay for”?
It’s stuck around all these years because it’s true.
Yes, hiring inexperienced, under-qualified employees is an easy way to save money in the short term. But, in the long run, bad hires will drain your bank account. You’ll end up forking out more than expected in training or re-hiring. And you’ll run the risk of damaging your business’s hard-earned reputation.
4. Overpaying for Office Space
Rent will be one of your most significant business costs. So consider whether you need to be paying as much as you currently do.
Although it’s essential to focus on long-term goals in business, it’s better to think about the short-term when renting office space. If you’re currently paying for unoccupied desk space and have no immediate plans to hire new team members, then you’re wasting money.
One great way to cut down on office costs is to encourage flexible working and allow employees to work from home at least some of the time. That way, you might have a team of 50 but only need 25 desks. Permitting staff to work remotely also helps to cut down on heating and electricity bills.
5. Bad Bookkeeping
Poor bookkeeping is terrible news for your business. Inaccurate financial records generate time, money, and productivity losses – not to mention the impact on your sleep. Bad bookkeeping leaves you liable to make mistakes on your tax return and means you’ll probably fare poorly in the face of an audit.
Keeping excellent financial records is one of the most effective ways to protect your business against disaster and ensure that your organisation stays financially healthy for years to come. It’s never too soon to invest in bookkeeping software or, better yet, the services of a professional.
While it’s true that many businesses do fail in the first year, this is due primarily to a lack of planning and preparation. If you’re ready to put the above common-sense steps into place and invest in the financial health of your business, then you’re better positioned than many entrepreneurs. Avoiding these money traps will not only protect your business against financial disaster but will allow you to accelerate growth and reap the rewards of entrepreneurship all the sooner.