What not to do when starting your first business
One in four UK adults want to start their own business this year, according to research by social enterprise Cause4. But with start-up failure rates remaining stubbornly high, turning dreams into reality can be fraught with difficulty.
If you’re a first-time entrepreneur, there are some common mistakes to avoid:
1. Don’t mistake a hobby for a business idea
The ultimate dream for many aspiring entrepreneurs is to get paid for doing what you love.
But sometimes, no matter how passionate you are about your hobby, it just doesn’t have a commercial backbone. Attempting to monetise a pastime where there is no real business opportunity could quickly turn sour, especially if you give up a well-paying job to do so.
That’s not to say there isn’t scope for commercialising hobbies, but as with any business idea you need to ask yourself some important questions. Is there a genuine gap in the market for your business? Who are your competitors? And, perhaps most crucially, how much are your overheads? The answer to the last question will inform your pricing model, and then you need to ascertain if your customers are willing to pay that price.
You also need to consider that once your hobby is a business, there will be a hundred other things you’ll need to do to make a success of it. Ultimately, you’ll spend less time actually doing the thing you love.
2. Don’t forget financial planning
It can be common for first-time entrepreneurs to neglect financial planning. Having a great product/service idea is crucial, but the main reason small businesses fail is because they run out of cash.
Financial planning can help you estimate how much capital you’ll need to get your business idea off the ground. Once you’re up and running you need to closely monitor your business’s income and expenditure, as this will help to inform your investment decisions.
Key to this is having access to up-to-date financial information that provides a clear picture of your company’s cash flow. Our own On the Money research found that small businesses with accurate accounts grew significantly faster than those with old data in 2015.
3. Don’t underestimate the impact on your personal life
Being an entrepreneur can seem glamorous, but to make a real success of it you need to embrace the lifestyle.
In reality, this could equate to several years of sleepless nights, limited personal income and having to constantly navigate barriers ranging from cash flow woes to HR issues.
These challenges would send most people running for the hills, but you need to learn to thrive under the stressful conditions that entrepreneurship brings and prioritise your business over other key aspects of your life.
4. Don’t try to be a superhero
Clearly, entrepreneurs looking to scale their first business need to be 100% committed, but that doesn’t mean they can or should try to do everything. In fact, one of the biggest traps that founders can fall into is spending too long working in rather than on their business.
Whilst you’ll need to get the work done inside your business, try not to focus too much on the details rather than key activities that move the business forward. Your company’s growth could become stagnant if you don’t think about your strategy.
Instead of trying to be a start-up superhero, surround yourself with a team who you can rely upon to take control of all the crucial elements that make a business run efficiently. Where this isn’t possible, consider outsourcing tasks that eat into the time you should spend growing your business.
Every new entrepreneur should be prepared for a bumpy ride, but avoiding these common pitfalls can help you get your venture off to the best possible start.
To find out how KPMG Small Business Accounting could help free up your time so you can concentrate on business success, request a callback for a quote today.
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