Article by Vicky Walmsley owner of Risus Wholesale,
It is an uncomfortable fact that 4 out of 5 start businesses end in failure! This staggering statistic is in part blamed on the difficult trading situation we all find ourselves in but even in times of boom many fledgling businesses find themselves in hot water due to making avoidable errors. Think about it, given how many start up businesses fail following the most well worn path is not necessarily the best policy.
Understanding the reasons why businesses fail can save many from going under before they have even had a chance to get going, and some of the underlying issues are surprisingly common. I am going to briefly discuss (in my opinion) some of these deadly sins. I hope some of you find them helpful
1) Starting your venture for the wrong reasons
Why are you starting your businesses? To become a millionaire? Because you think it will be easy to make money?
Then take a step back. Running your own business is hard, very hard and it takes time, dedication and drive. If you have all those things, then great, you are off to a good start. Too many people believe it is simply a case of Googgling ‘wholesale iphones’ – buying a load and then selling for a huge profit so you can retire to Jamaica. Oh you poor misguided fools! Suppliers don’t grow on trees and they certainly don’t fall in your lap. Neither will people give up their hard fought suppliers just because you ask them. Do your own research, find suppliers you can trust and be realistic about how much time, money and effort you need to put into the business for it to succeed.
2) Poor Management
Many business failures these days are put down to poor management. Whether this be purchasing, finance, accounting, selling, production or hiring and managing employees it is important to identify which areas you excel in and which areas you are lacking knowledge so that you can either gather advice or find people to help you out. Fail to do this and you are doomed to failure from the start. Also being educated about fraud and putting measures into place to combat it with save a mountain of headaches further down the line.
Neglecting your business can also be fatal. Take care to study all aspects of your empire – cash flow, competitors, customer data, market research, etc. It is all too easy to disregard these areas once a business has become established.
A successful business owner is also a good leader and must be able to hire competent staff (if needed) and create a work place that encourages productivity. It is also important to be skilled at strategic thinking and being able to make a vision a reality by confronting change, making transitions and envisioning new possibilities for the future.
3) Failure to see the bigger picture
It is all too easy to focus on one or two aspects of the business and neglect the big picture. Sell, sell, sell is all well and good but as mentioned previously a successful business are made up of many different aspects. It is crucial to step back every once in a while to drive your business forward. To do this you must delegate wherever possible the tasks that can be done by others.
4) Standing Still
A wise man once said that the definition of business insanity is to do the same thing this year as you did last year and expect a different result. He was right. Successful businesses innovate and move with the times, those that don’t are simply left behind. Getting the basics wrong or failing to do them from the outset is a recipe for disaster as they are the foundations for a solid business and must be given the attention they deserve.
5) Ignoring cash flow
Cash is king! And no money = no business!!
Too many businesses simply run out of money because they over-stretch, over spend or simply fail to plan correctly. When times are tight as they are now then a tight fiscal policy is imperative, if you don’t have it or can’t afford to lose it then don’t spend it! Expansion does not happen overnight and sometimes it is better to ride out a rough patch that to jeopardise your whole empire by over reaching.
6) Failure to analyse the figures
Too many businesses have no ideas what is going on with the inner statistics of their business. This may not just be the financials but other quantitative measures such as sales conversion rates or web traffic statistics. Successful business owners measure everything that moves and even some that don’t!
7) Insufficient Capital
Now whilst it is possible to start up with a few pounds in your back pocket and build slowly month on month many businesses still fail to budget correctly for the ongoing costs of running your business. It is all too easy to under estimate the amount of capital you will need and you could find yourself being forced to close without being given a fair chance to succeed. It is also too easy to have unrealistic expectations of incoming revenue from sales.
It is imperative to work out how much capital you will need when first starting up to see you not only through the first couple of months but through the first couple of years. Most businesses take at least 1-2 years to become established and failure to budget for growth and expenses can be fatal.
I have created a simple spreadsheet that will help you plan how much money you will need to launch and maintain your business, you can download it here – http://www.thewholesaleforums.co.uk/threads/business-start-up-cost-calculator.144848/
8 ) Lack of a niche target market
I have seen so many times people saying ‘I want to start a website selling electronics, gadgets, furniture and toys. Where do I start?’ This is a fatal mistake. Trying to be all things to all people will only bog you down and mean that you are spreading yourself too thinly. Pick one are that you may have experience or an interest in and concentrate on it. Better to do one thing well than 10 things badly!
9) Not having a support network
There is an old saying that ‘Your network is your net worth’. Most small start up businesses rely on gaining their first sales from friends, family or friends of friends. They also rely on this network to assist with planning, logistics and other important roles when starting out. Before starting a business you must spend time cultivating the market – which means developing and nurturing your professional and personal connections. If you are not good at making friends or are one of those people who never keep in touch – entrepreneurship might not be for you. Many people do business with people they like or know so to help you get a leg up it is important to exploit this network. So, who do you know and more importantly who knows you?
10) Trying to compete with the big boys
Don’t make the mistake that many do by trying to take on market leaders. It is a sign of impending doom to try and take on someone in a frontal assault. Large businesses have enormous resources to deter competitors from entering their markets. Big companies can undercut your prices, outspend you on advertising, and choke off access to suppliers and distributors.
You don’t have to be the biggest or the best to succeed so concentrate on your presentation, customer service and products and you will little by little claw your way up the ladder but remember if you do reach the top of the ladder everyone out there will try to knock you off. Sometimes it is better to be at spot 2 or 3 and be satisfied with your lot!
Written by Vicky Walmsley.
We have a retail website launching at the end of August to supply Mums with party bag toys and party supplies – www.archiestoybox.co.uk
We also run a wholesale business for customers who wish to buy in bulk for retail shops, fund raising events, school PTA’s or Ebay selling – www.risuswholesale.co.uk
Other articles by Vicky Walmsley:
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