Monday, October 3, 2011

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.


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