What are the most common areas in which mistakes are made when planning to start a business?
When starting a business very often one of the biggest challenges facing an entrepreneur is the lack of sufficient business skills.
You will only realise the importance of having these skills, when the lack thereof adds unnecessary expense, and starts to have a negative impact on your company profit margins.
Here are some pitfalls to watch out for:
- Financial: Insufficient understanding of financial principles could be catastrophic, as the basis for maintaining a positive cash flow and net profit is reliant on this information. Not complying with the basic legal requirements i.e. not formally registering your business or conforming to SARS legislation could also result in unnecessary financial penalties being imposed.
You’ll find helpful information about financial management here.
- Systems and procedures: A project or task that is ineffectively managed will result in unnecessary time delays on deliverables (and additional financial constraints) which will lead dissatisfied customers.
- People skills: Inadequate people management skills could result in an unproductive team or a high staff turnover.
- Communication: Not having the ability to write and speak effectively may be interpreted as a sign of unprofessionalism within your organisation. The internet is a very useful tool for acquiring examples of essential business communication in the form of letters and emails.
- Equipment: Inadequate information technology knowledge will have a detrimental effect on the efficiency of the business. Modern day businesses cannot function effectively without the basic up to date equipment i.e. computers and telephone access
- External factors: Another component that is often neglected in business planning is the consideration of the external environment. The external environment refers to all the unpredictable issues that may occur outside of the business that may have a direct impact on your business.
Consider what impact the country’s economic situation could have on your business. A sudden increase in interest rates would leave your customer with less disposable income to purchase your product or service.
- Flexibility: Your business idea needs to be as flexible as possible so that you can adjust your strategy should conditions within the external environment change. These changes could present your business idea with a new opportunity or threat.
- Compile a SWOT analysis: A comprehensive SWOT analysis will enable you to understand your own weaknesses, determine your strengths and analyse the opportunities and threats within the business environment. You can find an example of how to do a SWOT analysis here.
- Competitor activity: Ignoring your key competitors is a fatal mistake. Your competitors are easily visible. Get to know them well, monitor their performance and gather as much information about them as you can. Find out how to do a competitor analysis by reading this article.
- Know your target market: The customer is ultimately the determining factor of the success of your business. Identify your target market accurately and determine what matters the most to them.
Starting a business is easy. But making sure that you start it off on the right foot and that you consider all of the elements involved is more challenging. By watching out for these pitfalls you will have a better chance of success.