If you are at the point of taking the plunge and starting up your own business, may I congratulate you on making it this far.
It shows you have ambition, determination and guts. You want to be the creator of your own destiny. You are now responsible for your success and are free to make your own decisions.
It is amazing that how so many people dream about being in charge of their life and running their own business, but most never have the determination to escape the shackles of employment. Perhaps their lack of ambition is a good thing as most new businesses in the U.K only have a 20% chance of making it into their second year of trading.
Starting a business can be a rewarding journey to self-sufficiency but is full of risk, and 4 out of 5 business start-ups fail within their first year. In order to make your start-up a success, lets first look at the main reasons why so many businesses fail.
REASONS WHY SO MANY START-UPS FAIL:
-Many people start the business for the wrong reasons. Many people have an unrealistic notion of what it takes to set up and run a business. Some people enter into a business with the illusion that it is an easier option than employment. Some people buy a business or a franchise expecting the business to run itself and lack the passion and determination to make it a success.
-Some people have the wrong definition of what an entrepreneur is actually about. Being an entrepreneur means that you have to be able to wear many hats at the same time in the business as well as juggling the business with your personal and family life. You have to be multi-skilled and be able to think on your feet and overcome all sorts of obstacles to stay on the course to building a successful business. You can delegate, but you must have a handle on your selling and marketing, understand your customers, manage the day to day operations, negotiate with suppliers, keep on top of the finances and cash position, chase customers for payment and a whole host of other activities.
-The fact that many business owners have to do so many different tasks, means that a lot of entrepreneurs spend all their time working in the business, rather than working on the business. It is so important to be able to step back from the daily routine and see the big picture. At some point the entrepreneur has to be able to delegate and concentrate on driving the business forward.
-Similar to being too close to day to day, is the lack of any planning. You would not start a car journey without knowing where you are aiming to go. So many start-ups do not have any real plan of what they are trying to achieve. The lack of planning also means that all parts of the business may not be going in the same direction and can cause inefficiencies that deplete the limited cash, a start-up usually has.
-The sayings that cash is king and sales are vanity and profit is sanity are very true. Many businesses fail simply because they run out of cash. Cash is the oil of any business and managing the working capital and efficient credit control is paramount to success.
-As well as not keeping on top of their cash position, many businesses fail to measure their performance and do not know how they are actually doing. Which products provide the best margins? What is the most profitable target market? What marketing activity produces the best conversion into sales? Financial and key performance data can tell you where you presently are and whether you are on your intended path.
-A lot of businesses do not move with the times and simply fade away. They fail to react to market conditions and changes in customer tastes. For a business to not only survive, but prosper it must constantly watch its environment, understand its customers and differentiate itself from the competition.
TIPS FOR START-UP SUCCESS
So if you dont let any of the above happen to you, then your business will be well on its way to not only surviving the start-up phase, but growing into a successful and profitable business, which you can sell for a leisurely retirement or pass on to a successor.
In summary, here are the critical success factors for a successful business.
-As an entrepreneur, you are sat in the drivers seat. You need what I call the 3Ps: PASSION, PURPOSE AND PERSISTENCE. Your business must therefore have a vision of what it wants to achieve and a mission of how it wants to achieve it. A business does not exist without customers and it is essential that that vision is satisfying a real need or solving a real problem for your customers. The vision is the soul of the business and everything needs to point in the same direction to achieve that vision.
-You need to able to step back from the nitty-gritty and always have the big picture in mind. Take the straight path and do not wander all over the place. You need to plan where you are going, what your starting point is and how you will get there. In simple terms you need a business or marketing plan.
-You will never know where you are or where you are going if you do not measure the performance of the business. Most small businesses only employ a book-keeper who provides limited financial information and then has a profit and loss account and balance sheet prepared once a year by their accountant, mainly for regulatory and tax purposes. These financial statements are usually not very useful as they are months out of date and may not align with the profit and cost drivers of your business. Other non-financial quantitative data such as sales conversion ratios and marketing payback are also essential for good decision making and eliminating inefficiencies.
-"Cash is King". If you have no cash, you have no business. Most small businesses do not forecast their cash flow and manage their working capital. Cash is the lifeblood and must be monitored and controlled.
-A business only exists as long as there are customers to buy its product or service. A successful business is constantly innovating and improving in all areas. This does not just mean introducing new products, but optimising the operations, refining the marketing mix and the promotional mix, and looking for new target markets. It is a process of evolution – the strongest survive. You need to differentiate and be ahead of your competitors.
Moneymoon Financial Coaching
Tel: 01323 652819