Unfortunately very few start up businesses make it beyond their 3rd year. Failure is usually down to a number of clearly identifiable mistakes, which if small business owners are aware of, can increase their chances of survival.
Here are the top 10 common mistakes which small businesses tend to make.
Lack of Market Research
When a budding entrepreneur comes up with an idea for a new business he assumes that because he would buy such a product or service then everyone else will. This may be the case for day-to-day necessities but for other items this is usually not so.
It’s important that when you start up you carefully research the market to check that:
• There is demand at a level which would lead to a sustainable business
• People are prepared to pay the price required for you to make a decent profit
Undertaking market research may appear time consuming but the effort will pay off.
Poor Record Keeping
Some business people are not born administrators; they feel more comfortable getting out there and ‘doing the business’. paperwork is too easy to ignore but can never be put off indefinitely.
Sales, purchases and other expenditure must be carefully documented, so you know whether you are making a profit or not. Invoices must be issued on time and chased up promptly if there is a delay in payment. It’s all very well having the sales but poor record keeping can hold you back.
Having your paperwork in order will also save you time when it comes to your accountant doing your year-end books!
Insufficient Capital
When starting off it’s easy to decide what capital is required for fixtures and fittings, machinery and stock. What many new business owners forget about is the cash needed to fund day-to-day requirements, i.e. cash to pay expenses before your customers pay you. This is known as your working capital requirement.
Small businesses can fail because they have insufficient cash to start off to meet these immediate expenses. If you wish to survive make sure you set aside enough cash to meet all your needs for the first few months.
Ineffective Marketing Or None At All
You cannot afford to treat the cost of marketing as an unnecessary expense. A business with no marketing is like waving in the dark – you know you are doing it but no one else does!
There are many ways to promote your business on a small budget; it’s just a case of being inventive and creative. What ever you do, don’t assume that people will quickly know you are in business – they won’t, unless you tell them.
Ignoring Changes In The Market Place
As a small business owner it’s very easy to get immersed in your business and not see what is happening around you in the market place. Always keep your eyes and ears open to what the competition is doing and what your customers want. Don’t get left behind.
Owner’s Attitude
Attitude is everything in business. Don’t forget that the real boss in your business is the customer. Running a business may make you feel important but don’t let this develop into an ‘I am better than you’ attitude. Do this and you will quickly chase your customers away.
Spending On The Wrong Things
Being in business can be exciting, especially as the cash starts to roll in! However, don’t be tempted to spend it on a new car, a house or just a good time. If you are to own a successful business then you have to keep some cash back to fund future growth. A business cannot grow without cash, so commit to spending business money on the business.
Dependent On A Small Number Of Customers
Don’t fall into the trap of setting up a business just because one person says they will buy from you every week or month. Setting up and running a business, which is dependent on one customer, is not a recipe for success. What happens if, one month after you have spent all your cash to set up your business, that customer says he has changed his mind and has decided to buy elsewhere? Unless you can find other customers very quickly you are faced with closure.
Before embarking on a new venture make sure you have a sufficient number of customers such that if a few go elsewhere you can still continue trading.
Growing Too Quickly
Surprisingly, growing too quickly can be a problem. You have to be disciplined enough to only take on work you can handle. If you are tempted to accept too much you could end up disappointing not only the new client but also your existing ones.
Also, don’t under-estimate the impact rapid growth can have your administrative burden. As I mentioned earlier, getting behind on the paperwork can have an equally damaging effect on your business.
Trying To Do Everything
Finally, the problem most small business owners have is the fact that everything falls on their plate. Inevitably this is how it’s likely to be in the beginning, when the limited budget means that staff are a luxury, but as the business grows be aware that you cannot continue to do all tasks. There will come a point when you become inefficient and not have enough time to complete everything in sufficient detail. Taking on an extra pair of hands will increase your costs but you will be surprised at how much time will be saved, allowing you to do what you do best – getting the business in.
Take a look at each of the mistakes and make sure that you don’t fall into these traps.
Friday, September 25, 2009
Thursday, September 17, 2009
Will Your Small Business Have A Happy Ending?
There is no question that as a small business owner you have persevered and worked hard, dedicating your life to the success of your company. That being said, don’t you think a company you put all of your energies into, deserves the chance at having a happy ending? Have you considered the impact your death, disability, retirement, or even divorce could have on your small business?
If you are the owner of a small business it is time for you to stop thinking of only what is happening now, and start focusing on what could happen in the future. Therefore, you need to put your priorities into perspective by protecting yourself and your business with a succession plan. A business succession plan is what you need to ensure that your business has a happy ending by remaining secure, regardless of what may happen in the future.
In particular, a succession plan allows your business the chance to be able to stand up to any challenges that may occur along the way. For instance, certain setbacks that you might experience may be entirely beyond your control such as divorce, disability, departure and death. But with a business succession plan you have the chance, as a small business owner, to ensure that regardless of what may happen to you, your business will be protected.
The following are a few aspects you should to take into consideration when creating a business succession plan for you small business:
How to Begin the Succession Planning - Since you need to make choices before you can really begin achieving your succession planning goal, you must first think about your long term business objectives and ask yourself important questions such as –
• Will I sell my small business?
• Should I set up a plan that allows me to transfer my business to one of my business associates or a family member?
• Does my business have public potential?
Of course, business succession planning begins with much more than simply deciding who you will be giving your business to in the event that you can no longer run your company, or wish to sell it. Additionally, succession planning is about keeping your small business afloat and successful to ensure that your absence will not devastate your company. Therefore, in order to maintain future control of your business, you will need to begin your succession planning by making choices that will concern things such as:
• ownership objectives
• asset protection planning
• taxation and transaction planning
• estate planning
You will want to keep in mind, however, that due to the fact that every action you take with succession planning will result in a reaction, you will require the assistance of experienced experts when developing your plan.
Understand the Dollars and “Sense” of Business Succession Planning – Like any type of business preparation, your business succession plan needs to be orderly and handled carefully if you don’t want to suffer the consequences of financial losses – or worse – the loss of your small business. That being the case, you need to know exactly what you are dealing with, and how you can achieve the most of your planning.
The one mistake you will not want to make is to overlook your business finances. You can help keep your business secure by properly using the following, and more, in your succession planning before problems occur:
• Life insurance
• Disability insurance
• Annuities
Furthermore, you will find that with an orderly succession plan, you will be avoiding the possibility of your business having to be sold to pay off the estate tax, in the event of yours or (if you have one) your partner’s death. It is no secret that estate taxes can claim up to 55% of an estate that is taxable, which is no mystery why so many businesses fall into debt, become bankrupt, or are sold due to the death of the owner or partner.
In addition, another aspect that needs to be considered is that clients are most likely to do business with other businesses after the owner or partner is deceased. However with the proper succession plan, your business should be able to maintain any regular clients - or if not - it will be better equipped to survive the possible drop in assets if a slow period should follow.
Know How to Write Your Happy Ending – Remember, when all is said and done, the outcome of your succession plan depends entirely on the choices you make regarding the future of your small business. It is imperative that you take the time to make the best choices that will allow you to implement a succession plan, which keeps you in control of the outcome that involves the transfer of your company. By knowing how to ensure the prosperity of your business future with a succession plan, is how you will write your happy ending.
If you are the owner of a small business it is time for you to stop thinking of only what is happening now, and start focusing on what could happen in the future. Therefore, you need to put your priorities into perspective by protecting yourself and your business with a succession plan. A business succession plan is what you need to ensure that your business has a happy ending by remaining secure, regardless of what may happen in the future.
In particular, a succession plan allows your business the chance to be able to stand up to any challenges that may occur along the way. For instance, certain setbacks that you might experience may be entirely beyond your control such as divorce, disability, departure and death. But with a business succession plan you have the chance, as a small business owner, to ensure that regardless of what may happen to you, your business will be protected.
The following are a few aspects you should to take into consideration when creating a business succession plan for you small business:
How to Begin the Succession Planning - Since you need to make choices before you can really begin achieving your succession planning goal, you must first think about your long term business objectives and ask yourself important questions such as –
• Will I sell my small business?
• Should I set up a plan that allows me to transfer my business to one of my business associates or a family member?
• Does my business have public potential?
Of course, business succession planning begins with much more than simply deciding who you will be giving your business to in the event that you can no longer run your company, or wish to sell it. Additionally, succession planning is about keeping your small business afloat and successful to ensure that your absence will not devastate your company. Therefore, in order to maintain future control of your business, you will need to begin your succession planning by making choices that will concern things such as:
• ownership objectives
• asset protection planning
• taxation and transaction planning
• estate planning
You will want to keep in mind, however, that due to the fact that every action you take with succession planning will result in a reaction, you will require the assistance of experienced experts when developing your plan.
Understand the Dollars and “Sense” of Business Succession Planning – Like any type of business preparation, your business succession plan needs to be orderly and handled carefully if you don’t want to suffer the consequences of financial losses – or worse – the loss of your small business. That being the case, you need to know exactly what you are dealing with, and how you can achieve the most of your planning.
The one mistake you will not want to make is to overlook your business finances. You can help keep your business secure by properly using the following, and more, in your succession planning before problems occur:
• Life insurance
• Disability insurance
• Annuities
Furthermore, you will find that with an orderly succession plan, you will be avoiding the possibility of your business having to be sold to pay off the estate tax, in the event of yours or (if you have one) your partner’s death. It is no secret that estate taxes can claim up to 55% of an estate that is taxable, which is no mystery why so many businesses fall into debt, become bankrupt, or are sold due to the death of the owner or partner.
In addition, another aspect that needs to be considered is that clients are most likely to do business with other businesses after the owner or partner is deceased. However with the proper succession plan, your business should be able to maintain any regular clients - or if not - it will be better equipped to survive the possible drop in assets if a slow period should follow.
Know How to Write Your Happy Ending – Remember, when all is said and done, the outcome of your succession plan depends entirely on the choices you make regarding the future of your small business. It is imperative that you take the time to make the best choices that will allow you to implement a succession plan, which keeps you in control of the outcome that involves the transfer of your company. By knowing how to ensure the prosperity of your business future with a succession plan, is how you will write your happy ending.
Wednesday, September 9, 2009
Unsecured Start Up Loans For Small Business – Is It A Good Idea?
First-time small business owners usually are chary of unsecured start up loans. This is because the time frame for making a profit is not definite whether or not there is a properly thought out and lucrative business plan in place for the future business.
When profits or revenues do not materialize per plans, as in most cases, there is danger of default on loan repayment. When this happens credit rating of the person involved gets degraded as unsecured loans are granted on the basis of credit and borrowing history of the business owner.
And if there is bad credit history behind, he/she can very well forget that small business loan. Let’s discuss some more aspects of unsecured small business start up loans.
Some Facts
If the credit history of ‘to be’ small business owner is good, unsecured start-up business loans are easier to avail as compared to other business loans. But it is better to go for secured loans against property or equipment affiliated with the business.
Secured loan not only keeps personal credit rating intact but poses lesser risks for the business owners, because they can use the hypothecated equipment to generate a profit for the business. As a result the loan can be paid back on time. Not just that, secured loans are for longer tenure and come with lesser interest rate burden, thereby lowering the cost of loan.
But if you have decided to apply for unsecured small business start-up loans, you should be careful about the requested amount. Remember, the more you owe on the loan (including interest), the more will be the money which you have to repay.
If you are not exactly sure how well the business will do in the first year and want to keep your credit rating good, it is best to request a small amount for your unsecured start-up business loan. This will make sure that repayment installments are small and if you are punctual in repaying, you can always ask for more, which will be gladly given.
Some Advice
Before you apply for an unsecured business start-up loan, there are several things that you should keep in mind.
First of all, you will need to convince the lender that it is a good decision to issue the loan to you. Since unsecured loans are based on your credit and repayment history, you will have to convince lenders that you can handle your personal finances in an organized fashion. Good credit record will put lenders at ease since they will be able to see your repayment history on your credit report.
Since lenders will be looking at your credit report, you should maintain a positive report as far as possible. If you know that you owe certain lenders, you should try to settle these debts or set up a payment plan with your creditors. This will be visible on your report.
Before you make any final decisions about unsecured start-up loans for business, be sure to speak to an accountant or a representative from your local bank. This will make sure that you are applying for the right loans which would help your business to develop quickly and steadily. You must not take a decision unless you are convinced.
Tuesday, September 1, 2009
Set Up Your Online Business for Less
Are you starting an online business with a small budget? That's OK. Online businesses are one of the lowest cost businesses to run - if you know what you need to pay for and where to go.
Follow these suggestions for getting your website set up inexpensively while not sacrificing quality. There are some things you need to pay for (and this will tell you how much) and other things you can do just as well for free.
STEP ONE: GETTING A DOMAIN NAME
There's no reason to pay more than $10 - $15 for a domain name, so feel free to shop around. Domains are important because they give you credibility as a business.
Free websites do not enable you to have your own domain name so instead you end up with mybusiness.freespace.com instead of mybusiness.com. See the difference? Your customers expect you to put some money into your business and this is a clear tip off that you are not doing that - and for $10 - $15, why shouldn't you?
STEP TWO: FIND A HOST
Hosting plans vary considerably. Much of what you pay for will be determined by the features your hosting account provides with its service.
Are you setting up a simple, one page site? You could probably use a low cost host for $5 per month. Do you need some extra help with templates and layout or expect a high amount of traffic or downloads? You may have to pay more but it can be well worth the extra expense to have integrated webpages already set up or to ensure your host is providing you with enough bandwidth to handle the traffic on your site.
Never use a free host, unless perhaps you want to start with a blog or similar format while you get your own website up and running. Free hosting usually means you pay in other ways - lack of a domain name or a lack of quality. Many free hosting accounts are for personal use only and do not allow commercial accounts. Try to get recommendations from others when looking for a good host.
STEP THREE: DESIGN
As previously mentioned you can find professional templates on some hosting services. These can give your website a professional polish without the expense of hiring a designer. You are limited, however, on the look you choose depending on the variety of designs available.
Templates are also available to others so your site may have the same appearance as someone else. If you need custom work done consider hiring a freelance web designer from a site like elance.com or ask a local student studying web design. Freelance sites often put you in touch with new designers who will charge less while building on their experience and adding to their portfolio.
Spending money wisely is important when starting any business, but some free services will cost you in reliability or image. On the other hand there are some cheap deals you may not hear about so don't give your hard earned money (or worse - your credit) for a service you can pay less for and get the same results.
Follow these suggestions for getting your website set up inexpensively while not sacrificing quality. There are some things you need to pay for (and this will tell you how much) and other things you can do just as well for free.
STEP ONE: GETTING A DOMAIN NAME
There's no reason to pay more than $10 - $15 for a domain name, so feel free to shop around. Domains are important because they give you credibility as a business.
Free websites do not enable you to have your own domain name so instead you end up with mybusiness.freespace.com instead of mybusiness.com. See the difference? Your customers expect you to put some money into your business and this is a clear tip off that you are not doing that - and for $10 - $15, why shouldn't you?
STEP TWO: FIND A HOST
Hosting plans vary considerably. Much of what you pay for will be determined by the features your hosting account provides with its service.
Are you setting up a simple, one page site? You could probably use a low cost host for $5 per month. Do you need some extra help with templates and layout or expect a high amount of traffic or downloads? You may have to pay more but it can be well worth the extra expense to have integrated webpages already set up or to ensure your host is providing you with enough bandwidth to handle the traffic on your site.
Never use a free host, unless perhaps you want to start with a blog or similar format while you get your own website up and running. Free hosting usually means you pay in other ways - lack of a domain name or a lack of quality. Many free hosting accounts are for personal use only and do not allow commercial accounts. Try to get recommendations from others when looking for a good host.
STEP THREE: DESIGN
As previously mentioned you can find professional templates on some hosting services. These can give your website a professional polish without the expense of hiring a designer. You are limited, however, on the look you choose depending on the variety of designs available.
Templates are also available to others so your site may have the same appearance as someone else. If you need custom work done consider hiring a freelance web designer from a site like elance.com or ask a local student studying web design. Freelance sites often put you in touch with new designers who will charge less while building on their experience and adding to their portfolio.
Spending money wisely is important when starting any business, but some free services will cost you in reliability or image. On the other hand there are some cheap deals you may not hear about so don't give your hard earned money (or worse - your credit) for a service you can pay less for and get the same results.
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