We see many new small businesses and business ventures. While we always want our businesses to succeed, the unfortunate truth is that many fail. The good news is that many of these failures can be avoided from the get go. Here are some tips for things to avoid when you first open your new business.
Not Obtaining Enough Financing
Whether for working capital or capital costs, one common theme between new businesses is not having enough capital. We find that capital budgets are relatively accurate, where the downfall lies is in the ability to project working capital and owners being too optimistic when preparing their projections. These two factors consistently lead to cash shortages. Working capital projection is extremely important. Moreover, itâ€™s important to take a realistic approach to your budgets. Project your earnings in three scenarios: a worst, expected and best case. Ensure to obtain capital based on your absolute worst case scenario.
Location, Location, Location
While many people preach location is important, itâ€™s important to balance location with your industry. For example, location in the food and beverage industry has utmost importance, but is it as important if you are an office-based organization? We see many business making poor decisions when selecting their locations. Overhead is an important component of your cost structure. Therefore, if you are an office and operating a service-based business, location may not be as important. In this case, ask yourself if it make sense for you to pay a premium to be downtown? If not, select a location outside the core and save costs. One question I asked myself when selecting our location was: will this location increase my sales significantly enough to justify the increase in overhead/rent? Consistently ask yourself this question when selecting your office location.
Lack of Industry Knowledge
Some people eager to open their own business are patient and will wait for the perfect opportunity. However, a common mistake is not taking the time to learn and research the industry being pursued and they want starting a business in an industry which very little is known. A good example is an owner who purchases a restaurant business (independent, not a franchise) having never been in the industry. It generally takes over a year for that owner to become familiar with operations, understand what makes restaurants successful, and so on. The time it took to learn these processes has diverted the focus away from sales and landed the restaurant in a financially unstable situation. Moral of the story? Stick to what you know and pursue a business that offers a solid, consistent structure you have experience with. Youâ€™ll find that success will follow.
No Marketing/Sales Strategy
Congratulations, youâ€™ve opened your business! What comes next? The business world is highly competitive and attracting and retaining customers can be challenging to say the least. Be sure to create a detailed Marketing plan and determine and define your strategy for acquiring customers. Ensure this plan is in place well before your business opens. Too many small businesses fail to do this and find themselves scrambling for customers when they start operating. Prior to starting our business, we had a few clients out of the gates. Our Marketing plan was set motion so that when we officially opened our doors, we hit the ground running.
Quad Business Services can help make sure that you are on the right foot out of the gates. Call us today to schedule a free consultation!