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Every large business started as a small business and while many entrepreneurs with ambitions to found an empire of their own make a start on what they hope will be a runaway success, many fail almost as soon as they begin due to making one or more of the most common business mistakes from the outset. As licensed insolvency Practitioners, we’re well accustomed to assisting businesses and individuals in financial difficulty, but with a reported 80% of new businesses failing before they’re two years old, what are the business mistakes a budding entrepreneur should do their best to avoid?
What are the most common business mistakes?
- Failing to consider cashflow – For a business to succeed, profit isn’t enough. A healthy balance in your debtor’s ledger is impressive but it’s of no use if the cash you’re going to be paid isn’t in your bank to allow you to pay your own bills when they fall due. Doing work therefore isn’t enough, you need to devise a credit management strategy to make sure you get paid for it and that you always have money available wen you need it.
- Failure to make a business plan – Winging it will only take you so far. Granted there are some who succeed this way, but you can’t bank on good luck; a solid plan is far more reliable. Being able to figure things out as you go along and dealing with problems as they arise are good skills to have, but putting a plan in place early will give you a definite path to follow, will make it more likely that you’ll spot problems before they occur and as such will be able to avoid them in advance rather than deal with them when they happen. Deciding in advance where your business needs to go and how you’re going to get it there makes it far easier to focus on your objectives and as such more likely to achieve them. After all, you can’t hit a target you don’t have! A business plan will help you set out your goals.
- Relying on factors out of your control – If your business is overly reliant on one or two large clients to survive, or one or two main suppliers in order to operate, then what happens if you lose them? Placing your business in the hands of an external party in this way puts it in a vulnerable position and also gives those you’re reliant on leverage against you, neither is a desirable position to be in.
- Not making contingency plans – A business that doesn’t consider what could go wrong is likely to be hit hard when it inevitable does and one of the most common business mistakes is assuming that because things are going well now, this will always be the case. What if your office computer fails? Do you have a backup of the data? What if your supplier goes out of business – where else can you get what you need? What if your competitor starts offering better deals than you? How will you respond? The only certainties in the world have been said to be death and taxes, if you can consider worst case scenarios and put a plan in place for how you’d cope, you’ll be doing far better if one of them occurs.
- Not Accounting for tax – Speaking of taxes, those new to business are often surprised at how fast tax debt builds up and it’s one of the most common business mistakes made by new and old companies alike to fail to set money aside for forthcoming tax bills. Due dates for tax returns, corporation tax and other statutory filing obligations can cost a lot if you miss them, so make sure you’re on top of your paperwork, or better yet, get some help with it. Which leads us to…..
- Making false economies – Running a business at some point means that you’ll have to make use of the skills and talents of others. You can’t be an expert at everything and even if you’re able to do something yourself, there will come a point when it’s more cost effective to get someone else to do it for you. Imagine you’re able to earn £200 an hour for your business and you need some graphic design work doing. A graphic designer you approach offers to do it for £100. You don’t want to spend that kind of money when you have an old copy of Photoshop, so you spend a couple of hours muddling through and do it yourself. Simple math’s shows that this two hours you spent doing your own design work has stopped you earning £400 all to save spending £100, so you’re £300 worse off overall. (Assuming that your DIY design work was as good as what the expert would have done for you).
- Assuming you know best – While you’re an expert at what you do, things change and you need to change with them. Do you assume you know what your customers want ,or provide what you think they ought to want? Do you listen when your staff offer you the benefit of their experience, or just insist they do things your way? Do you keep an eye on your competitors, or consider that they should keep an eye on you? No-one knows it all and recognising this might allow you to pick up on something vital.
Avoiding Business Mistakes – Easier than dealing with them
At Lines Henry, we’re often approached by business already in difficulty. This could be as a result of mistakes that have been made, or matters beyond their control which have impacted the business. While we’re experts at finding the best solutions to a businesses financial problems, an insolvency practitioner isn’t just a professional to turn to in times of financial distress, we can also help businesses avoid financial distress thanks to our considerable experience of assisting companies just like yours.
No matter whether your business is solvent or insolvent, we offer a free consultation and when your business is just starting out, having the advice of an expert with decades of experience to call on will undeniably give you a better chance of success. Why not contact us today and find out what we can do for you?