Start-up success: Getting the basics down
Over 50% of all small business start-ups are failing in their first three years of trading.
Why? Start-up costs weren’t calculated correctly, there was a lack of working capital, or not enough cash flow – the reasons why are endless, and sometimes unavoidable. But we think that with the right planning from the outset, you’ll give yourself a better chance of reaching your business goals.
So we’ve put together what we think are essential tips to help you get the basics right, and move from a start-up to successful business.
1. Do your homework
It may seem like an obvious one, but we firmly believe in doing our research, and doing it thoroughly.
There’s an estimated 5.7 million SMEs in the UK today, and close to 660,000 new businesses are starting up each year. Keep this in mind and there’s a good chance that you’re not the only one who’s come up with your business idea.
So do your homework and research your chosen market. Ask yourself:
- What businesses are already operating in that industry?
- Is there any demand for your services, or a gap that you can fill?
- Who are your main competitors?
- What are their strengths and weaknesses?
- What can you do to stand out and compete effectively?
Doing a better job than your competitors is key. Put yourself in your potential customer’s shoes - what would make you switch from your local drycleaner, or hire a different electrician, when you’ve been using the same company for years?
2. Don't just do your homework - use it to your advantage
So, you might know that there are 10 main competitors in your industry, 5 in the vicinity of where you plan to trade and 3 that are targeting a similar demographic to your chosen market.
Now, how are you going to make your business more appealing to them?
- Think pricing – is it economical for you to trade at a price slightly lower than your competitors are?
- Could you do an introductory or bundled offer that will give you an edge?
- What about advertising - how will you get the word out?
- Are your competitors advertising online or offline, or at all? What method is going to reach your potential customers?
These points are only a starting point, there’s no limit to how you can get pitch your services about your competitors.
3. Put it on paper
Once you know what you want to do, don’t cut corners to make it happen.
Creating a business plan might seem like an arduous task, but it’s unavoidable – or it should be. Even if you feel like creating a business plan is distracting you from getting your business off the ground, don’t skip it - even if you’re the only one that’s going to see it.
Noting everything down will help you spot flaws and gaps, and hopefully, stop you from making a mistake later down the track.
The Gov.co.uk website has many useful tips on writing a business plan, which can be found here.
4. Don't underestimate your costs
When you create your business plan, don’t neglect your financials.
Estimate all possible incomings and outgoings, so you know how much you’ll need in start-up funding from the outset, how many sales you’ll need to make to cover any outgoing payments, and eventually, to break even.
Outgoings – there will be costs for office space, utilities, equipment and office supplies, tax and contributions , any loan repayments and so on.
Income – include any money that will be coming in from sources such as a second form of employment, benefits or working tax credit.
Sales and costs forecast – estimate how many sales you’ll be doing each month, accounting for any seasonal or other trends and align these figures with your estimated costs for making and fulfilling sales.
You can then use this to create a cash flow forecast, to give you a better idea of your revenue vs profits and what is available to invest and grow your business.
5. Processes, processes, processes
Creating a good process from the start will leave you in a better position later down the track. This should extend to all areas of your business –some key useful processes to put in place include business expense management and reconciliation, employee expenses – disbursement and reconciliation, and cash flow management.
6. Plan for the future and be resiliant
Our last tip is to make sure you’re flexible. Things might go wrong and the industry will change – just make sure you can adapt and overcome challenges along the way. Starting a business wasn’t meant to be easy.
This content was created on 7th June 2018