Before you begin even thinking about a business there will be some things that pop into your head. Self-employment isn’t easy, which is why two-out-of-three new businesses fail within their first three years. We’d all like to be left to get on with things we like or are good at, but running a business isn’t like that. Identify skills and knowledge you lack and do something about it. Weaknesses should not be allowed to interfere with the success of a business. This will show you the most common mistaken beliefs when it comes to new business owners.
You only need to produce a business plan for the bank or when you’re seeking a grant
This happens because normally people want to get on and start running their business. Most people think they know what they should do and see no need to test it or write it down. A business plan shows an opportunity to set goals and provides a framework to show the way a business taking shape, which provides useful future reference points against which success can be measured.
There is no point in doing market research. People only tell you what they think you want to hear.
With friends and family, that might be true, which is why you need to find people who will give you an honest answer – and possibly get someone else to ask the questions for you. That way, no one will be afraid to give negative responses. Plus if you go to your target audience, even if they want something else you can still change your products and services to suit them down the line.
You don’t need to do a cash flow forecast until my business is in trouble
Cash flow forecasting is possibly the most useful business tool. A cash flow forecast can provide insight into your business’s future financial needs. Start by estimating your costs, you should be able to do this fairly accurately. Then, if you know your margins, you can work out what sales you need to make and whether this is possible.
This is my business and I’ll run it my way
This one I guarantee has been heard a lot. This is fine but make sure you seek good advice and take it. Enterprise agencies, websites such as StartUp Britain, The Prince’s Trust, the Federation of Small Businesses and others can provide advice, support and possibly grants (although sound advice is potentially more valuable).
I will charge below the market rate, because then people will buy from me
Do you want to be known as the cheapest or the best? Furthermore, market prices may well have been pushed down to the limit, so simply undercutting could mean you’re condemning yourself to failure from the outset. Look carefully at your pricing and cash flow needs and be clear about how much you need to sell to cover your costs, pay yourself and make a profit. What’s more, capital items might need replacing in time, so you need to build up a cash reserve.