Starting your own business is a difficult but rewarding process. A startup can be very fragile, and you may face any number of challenges and obstacles as you build your business. While many of these issues may be completely out of your control, you will always have the ability to control how you react to them.
Here are six tips to help you avoid a few common mistakes that many entrepreneurs make:
1. PROPER PLANNING.
This may seem like an obvious recommendation, but having a plan makes all the difference. A business plan provides your business with a clear purpose and direction. In fact, you will find that the remaining steps will fall into place naturally as you develop your plan. The entire planning process should be thorough and include steps such as:
Planning the entire customer experience. It’s vitally important to plan for customer experience as you develop your business goals. Planning the entire customer experience enables you to build strategies that will help you reach your customer service objectives and create a service culture.
Creating a financial plan.
Financial projections will help you determine whether your business will be viable or whether more planning is necessary. These projections are also critical if you are seeking outside funding, as they make it possible for investors and lenders to evaluate your potential for success.
Conducting a break-even analysis. Your break-even analysis will help you identify what you will need to accomplish in order for your business to be profitable. A break-even analysis allows you to compare different cost structures and prices.
2. REALISTIC EXPECTATIONS.
It takes drive and enthusiasm to start your own business, but many entrepreneurs can be blinded by their own enthusiasm. It’s common for startups to overestimate sales volume, and find themselves in a tricky situation when things don’t go as planned. Unlike a more established business, you don’t have a sales history to draw from to make projections. So, how do you set realistic expectations when you’re starting with a blank slate? Take your optimistic one year sales goals, and cut that by 60%. Can you still operate at this revenue? It’s always better to plan for the worst but strive for the best. When in doubt, talk to other established business owners to see if your sales expectations are practical.
3. THE RIGHT ADVICE.
While it’s beneficial to seek out advice as you define your goals, make sure you are getting the right advice and not taking everything you hear at face value. While trying to start my first business at 22 years old, I tried to get a $10,000 SBA loan. Any business at the time, can only have three things: an idea, a computer, and a car. No money, no collateral, and no business experience. The loan officer took one look at business plan and would perhaps laugh at you out of the bank. He would tell you that your goal of $1 million in sales by end of year one was outrageous and impossible, and only made your lack of experience more apparent.
4. CASH FLOW.
Projecting your cash flow is another crucial step in the planning process. Cash flow is important in any business, but it is especially critical for startups. Things like loan payments, inventory, capital investment, customer receivables, and other startup costs can quickly cash-crunch a small business. In order for your business to succeed, you will need to manage your accounts payable, accounts receivable, and be prepared to handle any shortfalls. While all business owners hope to avoid shortfalls, they do happen. Make sure you are keeping 2-3 months of operating expenses in the bank at all times.
For better management of your cash flow, you may want to provide electronic invoicing and online payment options. The quicker your customers pay, the better your cash flow becomes.
5. CONTINGENCY PLAN.
Things don’t always go as planned. A contingency plan gives you something to fall back on and keeps you from panicking. Your contingency plan should account for any potential threats or emergencies, and outline how your business will respond to each one. Should something go wrong, you’ll have the resources you need to make level-headed decisions and address the issue quickly.
Contingency planning isn’t just for potential poor performance. You should also be planning for your possible successes. Failing to plan for success can harm your business just as easily as failing to plan for underperformance. Make sure you have a plan in place in the event that you exceed your expectations and are able to react appropriately to quick success.
6. MARKETING PLAN.
For most startups, finding a customer at the lowest cost per acquisition is extremely important. Digital marketing will typically give you the best ROI because it’s generally cost-effective and easy to measure. However, with a smaller startup budget, some of these items can be done yourself to start:
Website. Your website should do more than simply look good. The site should provide a high quality user experience and be designed to convert traffic into leads.
Pay-Per-Click Ads. With pay-per-click advertising on Google AdWords, you can reach people who are searching for your specific services online.
Social Media. Building a social media presence can help you connect with your target audience and increase brand awareness.
Email Marketing. Email marketing campaigns enable you to stay connected with your customers and drive repeat business.
Building a business is never an easy thing, but it is an incredibly rewarding thing. Be realistic with your planning and resilient as you take on challenges, and you’ll find yourself on a much clearer path to success.