Starting a business can be an exciting venture to undertake. While the early stages of your start-up are undoubtedly the most important and require your undivided attention, the pressure can often cause you to make poor decisions and overlook priorities that can have a major impact on your business down the line.
It is thus critical for any new business owner to be aware of and avoid making any decisions that may have a potentially negative impact on your company going forward. In my experience, the following are the most common mistakes that small businesses make, as well as practical tips on how to avoid them. Although they do not guarantee success for your business, they will definitely assist in guiding you through the first vital six months of your business:
- Always start as lean and mean as possible and remain that way
– Only purchase assets and stock that are absolutely essential and that you cannot function without. In other words avoid the nice-to-haves. You don’t need a Rolls Royce to get from point A to B.
– Stay away from the flash and morally righteous, nice to provide things such as providing medical aid and pension fund schemes for employees off the bat. Rather wait until your cash follow allows you to do so at a later stage if possible.
– During the early start-up phase, avoid the extravagant spending trap just to prove to other people and yourself that you ‘have arrived’.
– Don’t get conned into spending large amounts of money on special purchase offers or overly elaborate advertising campaigns that will yield few results and drain your financial resources.
– Do not try to get too big or expand too soon. Ensure that all your systems are in place first and that you know your market intimately, before even thinking of becoming adventurous and expanding too soon.
- Avoid overspending and ensure you have adequate reserve capital
– Ensure you have enough adequate reserve capital, at least for six months for bad periods to cover all your overheads.
– Limit your own drawings and salary to the bare minimum initially, until the business has proved itself and has a constant positive cash flow.
- Focus on sales and customer service
– Sales should be a key focus area to ensure that you have a constant source of income. Cast you net as wide as possible, and do not rely only on a few certain deals that might not materialise when you expect them to.
– Ensure that you spend a great deal of quality time on customer service and networking in order to get and ensure new and repeat business.
– Take time to ensure your business is properly structured in terms of costing, pricing, mark-up, gross and net profit and do not give away too many unnecessary discounts that you do not have to give away.
- Select the right staff and support
– Surround yourself with the most affordable, competent and experienced staff, otherwise you may not achieve your goals.
– Focus on what you are good at and what matters most, and make use of other reliable specialists, wherever possible, to provide all the other outsourced services at the best possible rates. Do not try to do everything yourself, otherwise you will probably drop all the balls you are juggling.
– Try to find a suitable mentor, preferably an expert in the field, to constantly advise you and to guide you through the honeymoon period and thereafter through difficult periods.
– Ensure that your accountant, attorney, industrial relations consultant, specialist service providers and mentor are always quite readily available to assist you when required.
– Before you start giving away more responsibility to staff and elaborate incentives, first let them conclusively prove themselves to you consistently over at least a 12 month period, otherwise you may be unpleasantly surprised.
– Never blindly trust even the best of your staff, as they might have other motives and agendas which might not necessarily be aligned to yours.
- Ensure you are on top of the necessary legal and admin requirements
– Ensure that the essential statutory documentation that is required is completed timeously, preferably before you actually start your business, otherwise as soon as possible after you have started.
– Research things properly and do not just enter into contracts or agreements with distribution agents lightly, as mistakes can be costly.
– Now that you are working for yourself, always remember to keep all your personal and business receipts and invoices, and never let the sun set without filing them first.
– Ensure that you submit all your monthly, bi-monthly and annual statutory documentation wherever applicable when it is due e.g. P.A.Y.E returns, VAT returns, UIF returns, Workmens’ Compensation returns, Annual Tax returns, BEE documentation etc.
- When things go wrong act quickly and be prepared to cut your losses if necessary
– If things start going wrong and you do not know what to do, then immediately obtain expert advice and act on it with lightning speed, even if it may cost you some money.
– Never be afraid or embarrassed to ask for advice, the wise do so and only fools refrain at their own peril.
– Should things not work out as expected and you sense you have made an irrevocable mistake with unavoidable disastrous consequences, then cut your losses and get out as soon as possible and try something else. Do not try and be a hero, especially when the writing is on the wall.
Remember that it takes time to build up a business from scratch, so be patient and do not
expect too much too soon! Always be realistic in your expectations.
Author: Kenneth Fisher CEO: Business Finance SME South Africa at the Real People Group