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Home » Start Your Business

Top 5 Mistakes in Setting up a Business

There’s lots of advice on the internet, including our site, about setting up a business. A number of sites will point out the inherent pitfalls in setting out on your own. Just like a child’s first steps, the journey is going to be full of up’s and downs, some joy and some sorrow.

In writing this post I deliberately left out the word ‘small’ in front of Business and so that leads us to mistake number 1.

1. Limiting your thinking.

Conventional wisdom goes like this. Start off small, work hard and you’ll become a big business. But first of all, you need to answer the question do you want to big, or do you want to be great? Big businesses constantly try to reinvent themselves as smaller and more nimble businesses. So think – where do your advantages lie?

Just because you’re small it doesn’t mean you have to think like one. Quite often you will be competing with businesses far larger than yours, but you don’t have to show it. Differentiate yourself with greater expertise and speed of execution.

Remember – you’re not small you’re specialised and can deliver highly personalised service.

Think different to be great.

2. Too Little Cash

How much is too little?

The truth is you don’t know until it’s too late. What you do need is a least 3 months funds to pay your mortgage and your bills and provide a buffer whilst you’re working on your business.

3. Working in your business

Many people see setting up their own business as an escape from the 9-5 and have a better life and enjoy more freedom. All too quickly they are starting at 6 in the morning and working until 10 at night. But it doesn’t matter – it’s great you’re your own boss and you have so much more freedom!

Really?

The fact is you’re not the boss, the business is your boss and you’re no more than an overstretched worker, you’re the marketer, salesman, lawyer, HR manager and accountant.

The only way to avoid this is to have processes for everything. Systemise your business as though you were going to franchise it. (Which you might)

Work out what you should be doing not what you like doing or are good at. Then work out what the best way of dealing with that is.

Some of the routine activities you do could probably be outsourced to other companies or even overseas. Sites such as www.elance.com www.odesk.com www.peopleperhour.com or www.guru.com

Typical jobs appearing on these sites include web design, blog writing, customer support, order processing and research. Often these activities are undertaken by highly experienced MBA graduates.

4. Not having a plan

Many businesses struggle to survive their first year. Typically it’s because the business was started on a whim and they got excited about an opportunity but either didn’t do the proper research or weren’t sufficiently committed. These businesses usually run out of money then wither and die.

It usually takes 3 years to make a lasting business. Year one the excitement of getting started and the momentum may well carry you through. In Year two the initial funding may be starting to run low and the excitement may start to fade.

Consequently you need to have a set of objectives about what you want to achieve and by when and what action steps are required to get there. Put all of these items on a project plan or calendar so that each week/day, you know what you’ve got to achieve to take you towards your objectives and survive. See our post about writing a business plan on a single page.

5. Don’t seek Mentors

A great way to get a business going is to find out what other people have to done to achieve success and implement those strategies in your own company. Find mentors who have either knowledge of your industry or other such knowledge and are willing to give you the time of day to help.

If you show genuine appreciation and approach the right people, the advice you get will help or break your company – you can start by asking friends if they would recommend anyone or you could approach someone from a different area who has been long established in your field. (Probably best to avoid your competition!)

However, don’t just think that it has to be someone within your own field of expertise. Oftentimes someone with a different perspective or knowledge of a different business area could help develop innovative solutions which could make your product or service more successful and beat the competition.

4 Comments »

  • Jason Brooks said:

    Thanks for this Matthew.

    As a new business start up it is good to read refresher articles like this. Year two is around the corner for me so I’m reviewing my output this year right now.

    2009 has been a tough year to start a business but maybe 2010 will be different.

    All the best for the New Year.

  • Danielle Coleman said:

    Getting the right people around you is key – whether that be mentors, staff, supportive partner and friends/family. Setting up a new business or a new division of a larger business is something that (in my experience) requires dedication and 100% commitment and having the right support network around you can only help you succeed!

  • Simon Beechinor said:

    Matthew, one tip I learned a long time ago and which I think is invaluable – that is: you can go on making a loss for as long as you like, as long as you’ve got cash! So understand the difference between a cash flow statement and a cash flow forecast….and work on the forecast every single day – every single day – and leave the P&L and the balance sheet to your accountant….Everything else will fall into place then!

  • Limited Companies Formations said:

    I completely agree about mentors – I was very lucky to have a mentor early on, and he not only gave me the knowledge to succeed but the emotional support to deal with the inevitable pain loss and frustration of being an entrepreneur.

    Another point I would add is that you need to be flexible when setting up a business.

    I have seen many of my friends launch with a fixed idea of what their business should be, and then change it the second it hits the market.

    Entrepreneurship is about feedback: you can keep your long time vision, sure – that should be fixed and resolute.

    But just be prepared to stay in flux at the start — especially when looking for that all important initial cash boost.

    Great article – I loved reading.