Starting your own business is a big step – it takes bravery to give up a regular wage and take the risk of starting out alone. However, figures show the challenges of starting a business aren’t putting UK entrepreneurs off.
At the start of 2016, a record-breaking 5.5 million businesses were in existence, and sole traders/self-employed businesses grew by 84,000. Official statistics show that small businesses make up around 99% of the firms in every industry sector.
For many, achieving longevity isn’t easy. Four in ten UK start-ups fail before they hit the five-year mark, and often make similar errors along the way. To minimise the chances of this happening to your business, here are five common business mistakes – and how you can avoid them.
- Failing to plan thoroughly
This might seem obvious, but many small businesses fail because the team isn’t aligned on future goals. At the least, it’s vital to define a strategy, share it with any co-workers and work together to define goals and how to meet them.
Revisit these goals regularly to make sure everyone is on the same page, and that any problems are resolved as soon as they emerge. The planning process should include a financial, marketing and business plan.
- Not defining the correct target demographic
No business can be everything to everyone. Taking the time to work out who your customers are, what they want and how to provide this, and where they’re located is key to success.
It’s important to thoroughly understand the problems your business can solve and target those affected. This will allow you to tailor your marketing plan accordingly.
- Ineffective marketing
Successful strategies for marketing your business can take many different forms. You can stick with traditional print advertising, or combine the old with the new and utilise the many online ways to effectively market your business.
All marketing strategies are essential for the success of your business. To select the most effective marketing plan, you must understand your target audience, know where to find them and how to talk to them. Don’t wait for customers to come to you – even the most successful multinationals invest in marketing and advertising!
- Failing to utilise new technology
There are endless digital tools available to help you in your business endeavours. Whether you use digital accounting and payment tools, or focus on customer relationship management databases, social media marketing tools or cloud platforms, technology can take a lot of the strain from your shoulders and help run your business smoothly.
- Not maintaining cashflow
Cashflow problems are arguably the biggest reason for small businesses going under. Late paying customers can bring down a company that hasn’t sufficiently planned ahead.
The Zurich SME Risk Index shows that small businesses in the UK are owed around £255 billion in outstanding payments. Approximately 60% of small and medium businesses have had to deal with overdue payments. There are number of things you can do to deal with cashflow problems caused by late payments:
- Be clear about payment terms from the start.
- Invoice correctly when work is completed.
- Make payment options easy for customers.
- Display your bank information clearly on every invoice.
- Send out timely reminders before payment is due.
- Encourage customers to pay by direct debit.