Starting your own business is certainly an exciting, yet daunting, endeavour. While many have the drive and ambition to make their business a success, others stumble at the start and never really get going. Here we’ve rounded up some useful advice to help small business owners avoid the pitfalls.
Poor market research
Steve Jobs once said, “A lot of times, people don’t know what they want until you show it to them.” Unfortunately, when it comes to small business startups it is better to err on the side of caution and invest in some sound market research. It should almost go without saying that no matter how great you think your product is, your product still needs to be in demand for it to sell.
Good market research can prove to be invaluable when it comes to new businesses. A CB Insights survey showed that 42% of startups failed as a direct result of the absence of a “market need for their product”. Through invested market research you will be able to identify your direct market competitors as well as an insight into your target market and their specific needs.
No clearly defined roles
Often small businesses start out with only a handful of people whose roles are interchangeable and overlapping as and when required. This model is referred to as a flat organisation, a structure that has no hierarchy in terms of roles and functions. Even though this approach can work from the outset, problems are likely to start occurring once the business starts to expand and the need for clearly defined roles becomes more vital.
Knowing who is in control of which aspect of the business is very important in moving forward. It becomes imperative that new entrepreneurs who are looking to expand and grow their businesses understand that they must work on their business and not in their business. Guard against wanting to do everything yourself and remember to focus on the actual running of the business.
Cash flow problems and no plan
According to the CB Insights survey, the second reason why businesses fail is down to cash flow problems. 29% of failed small business startups cite running out of cash as the main reason why they folded. Advice from all spheres point to the fact that small business owners need to be very careful when it comes to spending money early on (especially on the wrong things). Unsurprisingly “stupid spending” is a major cause why businesses fail and this comes down to the small business owner not taking control in vital areas of the business. Moreover, the CB Insights survey adds that running out of cash is usually due to other underlying issues such as overspending on manufacturing and advertising.
Lastly, and perhaps most importantly, small businesses need to have a good business plan in place from the get-go as well as a backup plan for when things don’t go as planned. Remember, “Failing to plan is planning to fail.”