8 Classic Mistakes You Need To Avoid When Starting Your New Business
Written by Mark Williams
Most people who start businesses make mistakes. Sometimes they’re minor and can be easily corrected, but others can be so major that the business is doomed to fail from the start. So, if you’re about to launch your own new business – what classic mistakes must you avoid?
1. Not enough market research
If your new business is to succeed, you must offer products or services that people want at a price they’re willing to pay. Knowing what potential customers want or need and how much they’ll pay for it can enable you to provide a solution. You must also know what your competitors offer and how much they charge for it. Market research is essential when starting a business. Research your competitors and speak to potential customers.
2. Flawed business idea
Just because you think your business idea is the best thing since sliced bread, doesn’t mean it is. A good business idea will enable you to make enough sales to sustain your business and generate a wage for you and any employees. Many new businesses fail because of flawed ideas. Carrying out basic market research, by seeking feedback from potential customers can enable you to make changes to improve your business idea – or help you realise that you really need to think of a better business idea.
3. Terrible website
Having an impressive website that showcases your brand, products and services is essential, even if you don’t sell online. Inevitably, when potential customers find out about your business, most will look at your website, which must tell them why they should buy from you and give them confidence in doing so.
To save money, many people create their own website when starting up. But it can prove a false economy if your website looks terrible and puts off potential customers. Committing some of your start-up budget to having a website produced professionally can be among your wisest investments. Make sure it’s well written with decent images, easy to navigate and buy from (if relevant), too.
4. Not enough cash
If you’re resourceful and sensible, you can limit your start-up costs. The less you spend the sooner you’ll reach profit. But there will be some costs, and it can take many months or even years to become profitable. People often underestimate how much money they actually need to start and establish a business. Businesses usually fail or fail to even get off the ground because they run out of cash. Work out how much you need to start and establish your business; limit your spending; and make sure healthy cash flow remains a key priority.
5. Random marketing
Basic market research can tell you how best to reach your target customers. Then you can plan your marketing activity where it is most likely to deliver sales. Many new businesses waste money on general advertising, when cheaper alternatives could bring much better returns. Do your market research; create a marketing plan; monitor the success of marketing activity; and improve your success by learning from your successes and failures. Explore low-cost and no-cost marketing options first, such as social media.
6. Prices too low or too high
Many new businesses set their prices low to attract customers, but then they can struggle to increase them to improve their margins. Go too low and you might not even cover your costs, which isn’t sustainable. Low prices can also put off some customers, because they might wrongly assume that your products or services are low quality. Set your prices too high and customers will go elsewhere if they can find better value for money. When setting prices be guided by how much customers are likely to pay and be sure that all of your costs will be covered.
7. No business plan
Writing a formal business plan means you’ll have to research and describe key aspects of your business and its market. You’ll also have to make predictions, based on realistic assumptions, but at least then you’ll be better placed to judge whether you can (on paper at least) make enough sales to sustain your business. You’ll also need to set some objectives for the next few years and decide how you’ll achieve them (ie your strategy).
8. No unique selling proposition
Successful businesses have a USP – a key reason why they’re able to attract and retain customers. You need to set your business apart from its competitors by finding a way to be special, especially if you operate in a very crowded marketplace. How can you distinguish your business? Why would a customer buy from you rather than one of your competitors? How can you be special? Give customers a reason to choose you rather than another business.
Mark Williams is a freelance editorial consultant, writer and SME content specialist with over 25 years' experience. He contributes to The Guardian Small Business Network and planned and wrote the Start Up Donut website. As well as award-winning magazines and websites, his writing has featured in national newspapers and Sunday supplements.