Most of us have probably heard the statistic that approximately two-thirds of all businesses fail within a year of their conception. This daunting realization is not exactly an invitation to put one’s savings or family on the line to begin a new entrepreneurial venture. Yet, the statistic is somewhat misleading.
The majority of new businesses do not fail because the idea is an unworkable one. Rather, most new ventures fail within a year because of mismanagement and lack of foresight. The idea itself may live on and prosper under another owner who either knew how to do it properly or learned from the mistakes of the original trailblazers.
So what are the pitfalls to avoid when starting your own business? Here’s a list that Nick Yates has compiled in order to help you avert disaster and ensure you do not become an addition to that unfortunate statistic:
Pitfalls When Starting a Business:
1) Not raising enough capital - Ask any business owner, successful or not, what he or she feels is the most important lesson they learned when starting their business; they will probably tell you that their initial mistake was underestimating the amount of capital required to start a business. The simple, undeniable fact is that the vast majority of entrepreneurs need to raise two to three times as much money as their initial estimate.
You can have the best idea in the world and the best implementation plan ever devised; but if you run out of funding halfway through that plan, you will hit a brick wall and create an opportunity for an entrepreneurial vulture to swoop in and capitalize on your misfortune. Mr. Yates recommends that you Take your initial estimate and double it (at least) in order to avoid losing your idea to a more forward-thinking competitor.
2) Making a deal with the devil for financing – We are of course talking about taking on a partner; giving away a piece of your idea and regretting it later. The fact is that most partnerships simply do not work out. If you simply must share a percentage of your company with someone else, be extraordinarily careful when choosing the lucky candidate… oh, and always have an airtight contract.
3) Paying as little as possible for employees – A company is nothing but an empty shell by itself. Its employees make it a living, breathing organism. If you skimp on your payroll in an attempt to cut costs, you will suffer in the long run. Mistakes, customer’s impression of your business, and general ineptitude will ultimately cost you far more than you would have spent hiring decent people. The motto “you get what you pay for” has never been more applicable.
4) Not analyzing or measuring your campaigns – a business owner who does not in some way measure the success and failure of particular aspects of his marketing and transactions is destined to be less successful that one who does. You might still be successful, but you will certainly be hampering and diluting your potential profit by not analyzing every measureable transaction and expense in your organization. Your costs will be too high, you will fail to cut out unsuccessful ventures in a timely manner, and your campaigns which could be more successful will simply flounder in mediocrity until you stumble upon the facts, if that ever happens. Don’t leave your success up to chance.
We hope you have enjoyed this installment of business tips by Nick Yates. We will bring you more important tips to aide you in the creation of your business in our next update.