Start-up issues

Small Business Start-up Problems

There are many issues facing small business in the initial launch and successful management of these problems can be critical to the continuing profitability and growth of the business.

1.     Most start-up small businesses cannot afford debt. Money is often scarce and initial costs high. This is common even if there is no debt; debt can add the burden of interest and principle payments. Revenues are usually slower to develop as owners often overestimate their ability to attract customers form existing business.

Borrow little or nothing. Borrowing increases the level of risk and potential loss if the business fails.

2.     Your knowledge base to be successful must be broad. Don’t be misled by friends and associates who have never owned a business. Without a large staff of professional advisors running a business requires knowledge on a lot of topics. Knowledge of advertising and marketing, knowledge of finance and taxes, knowledge of production and operating costs, knowledge of employment laws and government regulations, knowledge of product supply and customer demands.

All businesses face these issues and the ones that survive are operated by owners with the knowledge to understand problems and anticipate potential solutions. The inexperienced often flounder and fail.

 

3.     Advertising by financial and some government agencies directed towards small business tend to create an impression that getting loans or loan guarantees is readily available for those seeking the support. The reality is that neither is true.

Government grants, loans, or loan guarantees are difficult to get approved. Many businesses will not apply, many cannot meet the criteria for approval, and among those who apply few will receive support.

  

4.     Many wishing to start a business do not understand the numbers.

Although many businesses do have a good business plan, all the written prose merely expresses in words the essence of the plan which is the numbers. One does not have to be an accountant to run a business but you must know the numbers. Cash flow, ratios, costs, pricing are essentials that any owner must know and understand completely to operate successfully.

 

5.     Every successful business person must sell.

Owners cannot take the position that they want to own the business but don’t like to sell. Nothing happens in business if a sale does not occur. When a customer is ready to pay for the product or service offered a sale has to take place and that transaction will not take place without some selling effort from the company. Without some effort on the part of the ownership it is unlikely the business will be successful for long.

Procrastinating

Are you guilty of Procrastinating?

Think the time you spend answering e-mail, composing IMs, and trolling Twitter doesn’t have an impact? Think again. Procrastinating in making business decisions generates enormous costs from time wasted and decisions delayed.

There are several approaches that may be considered to eliminate this waste.

1.     Don’t delay. Any time you put something off the problem usually gets bigger leading to more stress and possibly more procrastination.

2.     Reduce the issue to small tasks and work in short bursts to complete each portion. This focused activity for short periods allows you to get the feel for accomplishment. It gets you started.

3.     Learn to prioritize. You may never get caught up with everything you need to do. To be an effective leader you have to prioritize and decide what’s important and manage your time effectively.

4.     Turn off distractions. If necessary turn off email, stop answering the phone; give 100% attention to the task at hand.

5.     Create a daily plan. At the end of each day spend 3-5 minutes setting up the next day’s schedule. It may save an hour the next day while you try to determine where to start your work activity.

6.     Be accountable. Make yourself accountable to someone for what you want to accomplish. This could be an associate, friend, or business mentor. 

A task can more easily be tackled if you visualize it completed. Remember the “Law of Expanded Time”. Work will fill the time available to complete it. By making less time available to complete a task, you will spend less time completing it.

JUST DO IT.

Business expansion

Business expansion

The do’s and don'ts of business expansion

At one time or another, every business goes through a growth spurt and, whether it’s a multi-national corporation or an entrepreneurial enterprise, expansion is a tough process to navigate.

The real danger for any expanding business is that it does so too quickly or in an uncontrolled way. When this happens, cash flow and customer satisfaction are usually the first casualties and, in extreme circumstances, these can result in the demise of a once flourishing business. The trick is therefore to manage the growth process so you reap the benefits in the medium- and long-term.

Plan your expansion

It may seem obvious that any entrepreneur going through an expansion phase should do so with a game-plan, but many businesses expand in reaction to circumstances and don’t draw up a solid plan. Without this roadmap, it’s easy to get lost along the way, making changes to your business that are either too costly or not well thought out.

Don’t over-expand

While planned expansion can take a business to a whole new level, over-expansion is one of the biggest dangers of a growth phase. It’s easy to get carried away in the heat of the moment and to expand beyond the needs and the financial capacity of the business.

As a rule of thumb, plan capacity based on a five-year projection of demand and allow an additional 10% of capacity over and above that for periods of heavy demand or for partial down-time in any part of your business. More than this could be very risky and leave a business with overheads it can’t cope with.



Get professional financial advice

Whatever the nature of your expansion, there are financial implications for the business and it’s always best to seek professional advice. If you need to build or purchase your own premises, for instance, it’s important to speak to a financial institution that has experience in this area.

For plant and equipment, you may need to consider a flexible financing option, either a loan or a combination of a loan and an equity investment. Again, an institution with experience in the field and in your own industry is essential.

Develop a Project Management Schedule for the expansion

Again, this may sound self-evident, but many businesses expand without treating the expansion like a project – one of the most significant it will ever undertake.

When drawing up a project management schedule:

• Identify key deliverables
• Attach dates to these deliverables
• Identify key responsibilities
• Set up a regular review schedule
• Identify procedures for managing non-delivery on any part of the project
• Build in appropriate timing and financial contingencies

Managing the process is as important as planning it and it’s important to commit to this in a formal way, building in the appropriate checks and balances.

Keep your customers informed

Expansion of any kind can cause disruptions in your day-to-day operations and it’s important that your customers know what to expect. Before commencing an expansion, tell them what you’re planning and what the expected completion date is. If possible, tell them what disruptions to expect and how you’re intending to deal with them.

Announce the completion of your expansion

Once the expansion phase is complete, it’s important to let both existing and potential customers know about it. Tell them about the increased capacity of the business and the additional products and services you can offer. Develop a special marketing drive to announce the occasion and send out media releases, especially to the local and regional press.

Celebrate this moment in your business – it’s one of the best marketing opportunities you could ask for.

Business Start-up

Mistakes that threaten start-ups

1.     Under financing: lack of sufficient funding is probably the most common reason new businesses fail. Many entrepreneurs fail to assess the burn rate of the capital they have. Often the most costly step is hiring too many people. Try paying people with equity rather than salary, you will end up with a much more committed team and preserve cash. Don’t overspend on equipment and technology you really don’t need to get going.

Also, many start-ups fail to realize that few customers pay promptly; this can severely impact cash flow.

2.     Starting without a plan: enthusiasm over a good idea is over-rated. An idea is only an idea and without a well-developed business plan chances of success are minimal. It is also very difficult if not impossible to raise financing without a plan.

3.     Underestimating marketing: Start-ups often fail because of the lack of marketing support. Don’t confuse sales with marketing. Sales close today but marketing builds your tomorrows. Marketing creates the awareness and product demand which will lead to the need for a sales force.

4.     Lack of unique position: many start-ups are imitations of an existing idea and represent only a marginal niche. Smaller niche products may seem to be less risky but the limited opportunity may have a short shelf life. Make sure the idea is worth pursuing over a long period and then make sure you have the resources to sustain the pressures of the initial years of development.

5.     Inflexibility: with start-ups you have to be prepared to change on the go. Rarely does the plan get executed without a hitch. Marketplace dynamics, competitive behaviour and economic conditions can dramatically impact the plan. Ability to react and change plans may be a key to survival.

6.     Lack of preparation: a key failure factor is often the slowness of introduction or delays that may be caused form lack of preparation. Lack of a completed package, delays from suppliers, incomplete marketing support, can delay a launch and perhaps cause the opportunity to lose momentum or perhaps even miss a window of opportunity that is forever lost.

Make sure all key elements to launch are in place to ensure the potential is fulfilled or the entire investment for the new start-up may be lost.