A high proportion of new business fail in the first few years. Here are a few mistakes you may want to avoid and enhance your chances of success.
Lack of cash reserves
One of the reasons why so many small businesses fail within the first few years is NOT because the business model isn’t viable or the entrepreneur isn’t “good enough” to make the business work, but it’s the fact the financial ramp up time is sometimes longer than expected. As a result companies simply run out of money to support the business and/or owners before the business is profitable enough to sustain itself.
Optimistic assumptions
Many newbie entrepreneurs fall into this trap. They have a great idea, they jump into the fray only to realize there were a few not-so-little details that they failed to consider or a few areas where their assumptions were overly optimistic and before they know it, that “no-brainer” business is hanging by a thread.
Be honest with yourself. Are you underestimating the time required to get the first client? Are you overestimating the demand for the product? Are you assuming zero risk by not allowing for what could go wrong?
No test run
Not everyone incorporates a business model into their planning. It’s so easy to get really excited by the concept of your business, but it’s quite another thing to put pen to paper to help you objectively evaluate your overall business model and its profit potential. The simple truth is that having a great idea is just a start – it doesn’t necessarily translate into a profitable model.
Doing it all to save
If you try to do EVERYTHING yourself, you’ll not only run yourself into the ground, your business will suffer, because you don’t bring sufficient expertise in every area. Your time is money. Think about where you must personally invest your energies. Should you be developing and refining your content, products and services, cultivating relationships with key clients and stakeholders, developing credibility within your industry? No one can do this for you.
That said, others can develop your website, handle your public relations, and perform random administrative functions. Utilize them.
Poor pricing strategy
Pricing too low or too high can both create negative results. Too low may create an impression of lack of quality or service; too high may simply be uncompetitive. Check to see what others are charging. It’s much smarter to offer value pricing initially and then raise prices over time. In many cases asking clients for their budget will not only give you an idea of what to charge, but it could minimize the risk of severely underpricing or over pricing your product or services. You may also consider providing different pricing options to increase the likelihood that you’re offering something within your client’s price range.
Perhaps there is a germ of an idea here that fits your situation and helps avoid traps that can threaten the business.
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