Starting a small business can be extremely rewarding – research from the Federation for Small Businesses finds that satisfaction levels of owners/managers/employees in small firms are much higher than those of larger firms.
However, starting a business can also be challenging – figures from the Office for National Statistics show that one in three new businesses fail in their first three years.
There are steps you can take to protect yourself as far as possible from early-stage hurdles.
1. Create an effective business plan
Your business will struggle to succeed without a business plan, and you’ll certainly need one if you hope to secure a business loan from a bank or funding from investors.
A business plan is the road map for your business that will set out your staffing, marketing, sales and product/service strategy, and having one will greatly increase your chance of success. We’ll be doing more on business plans very soon!
2. Manage the money
Our Three Year Glitch report finds that one of the main reasons many early-stage businesses fail is because of poor financial management. You must have control and understanding of your business finances in order to make informed decisions and take the right action.
Research from Intuit, quoted in Lord Young’s recent Growing Business report, found that firms are five times more likely to feel confident about their finances if they are using accounting software to keep track of their business as opposed to spreadsheets or pen and paper.
3. Get a routine
There is never a dull moment when you’re running a business, and never more so than when you first start up. Follow the advice of Intuit’s financial fitness coach Johnny Martin and get organised.
“Nobody loves doing admin, nobody loves reviewing suppliers, and nobody loves looking at tax but then nobody loves brushing their teeth either, and most of us do this every morning and evening because it becomes part of our routine (and obviously is essential for our health!). Use the power of the routine to keep your business healthy – schedule in regular time to tackle those important but easy-to-put-off financial tasks.”
Get his ideas for a useful routine now.
4. Understand your customers
Marketing is absolutely essential to getting your new business off the ground. However, a scattergun approach will see you wasting money for little return. Pippa Highfield from Brainwork Marketing says:
“A marketing plan will help you focus your limited resources (time and money) on your best prospects (your most profitable customers) to ensure your business prospers.”
See her ideas for getting your marketing right in the early days and beyond.
It’s equally important to pinpoint customers who are good (and bad!) for your cashflow. There’s no point slogging away for customers who pay very late or, worse, don’t pay at all. With accounting software, you can see at a glance who always pays on time and who is usually late, as well as who your most profitable customers are.
5. Get expert help
Skimping on an accountant is a false economy – they usually pay for themselves in the savings they make for your business due to their financial knowhow and they’ll also help you take the stress out of issues such as managing HMRC compliance and deciding what is the right business structure for you.
You also need to think about the best use of your time in general. Yes, you could do your own bookkeeping but would you be more productive focusing on your area of expertise? It can be hard to let go but outsourcing can help you achieve a lot more and stay sane.
You might also be interested in our real business story on the mistakes one business owner learned from in his first years in business, running Lux Creations Ltd. Read his story and tips now.
What is your top tip for surviving the first years in business?[Image courtesy of Stuart Miles/FreeDigitalPhotos.net]