While the stats on start-up failure can be alarming, there are a number of simple and practical ways to avoid the hazards.
While growth is on the minds of most entrepreneurs, survival is often the goal to begin with. Some say 90% of new businesses fail, while other sources suggest more than half go under in their first year. However, the causes of failure are nearly always avoidable.
So, here are some practical tips to help you prove the cynics wrong.
Keep your feet firmly on the ground
Some start-ups fail because of overconfidence.
Sales are often strong to begin with – the support of friends and family usually gives the launch a boost. And this can make it easy to get carried away.
But arrogance is perilous. Staying humble means prioritising the things that matter; things like the quality of your products and your customer service.
Hire an apprentice or intern
Start-ups often run before they can walk. With optimistic business projections in hand, they pay a recruitment company to put together a team of experts. But those experts can be pricey. And, when cashflow is limited, those experts can give you a serious headache.
Instead, consider apprenticeships. You’ll pay lower wages, and you’ll have access to financial support from the government. Plus you’ll be doing your bit to help local unemployment – it really is win-win.
Scrutinise your bills
Entrepreneurs tend to focus on profit-boosting ideas over more tedious issues like overheads. But in reality, overheads should come first because they’re easier to control, and dangerous if you let them drift.
Cutting your costs really is worth the effort. Take gas and electricity – typically the second-biggest monthly expense for a small business, costing thousands of pounds every year. Start-ups don’t often shop around for a better offer, but if you bought energy through XLN, you could save up to 40%. That would offer a serious boost to your bottom line.
Then imagine how much you could save if you scrutinised every bill – phone, broadband, insurance, equipment and beyond. You could save thousands – the difference between failure and success.
List tasks in order of financial value
It’s impossible to overestimate how scarce time can be when you start a business.
So, you need to set clear goals that are prioritised in order of financial value. Stick to this priority list stubbornly, focusing on everything that links directly to your bottom line. Leave the blue-sky thinking for when you’ve built a strong foundation.
Outsource when necessary
A small business has many of the same demands as a bigger one, but with only a fraction of the budget.
So, when you need HR, marketing and administrative support, you need to be flexible and creative. The freelance and outsourcing market is booming, and it’s often possible to meet your needs without recruiting full-time employees.
Start by looking for a specific business or agency that offers outsourcing of certain functions, like HR; companies like this are now very common. Or, head to a website like People Per Hour orFreelancer, and hire someone on a job-by-job basis.
Play to your strengths and adapt when you need to
Small businesses are nimble and flexible in a way that big businesses can only dream of. Which means you can change course with a minimum of fuss.
In many ways it’s your trump card, and you should never be afraid to play it. Things happen early in a business’ life that are difficult to plan for, and changing course allows you to limit the damage.
How not to become another start-up statistic – Startups.co.uk: Starting a business advice and business ideas. 2016. How not to become another start-up statistic – Startups.co.uk: Starting a business advice and business ideas. [ONLINE] Available at: http://startups.co.uk/how-not-to-become-another-start-up-statistic/. [Accessed 26 February 2016]