Starting up your own business can be exciting and exhilarating. It can also be frighteningly easy for the unwary to fall into traps and come unstuck by pursuing plans and strategies that may seem a good idea at the time, but can quickly lead to disaster.
The reality is that running a small business is often just as much about what you don’t do as well as what you do. What can seem the obvious solution can turn out to be the exact opposite. So here are the seven deadly sins most often committed by first time entrepreneurs – and how to avoid them:
Deadly sin #1: Not doing enough market research
You may think you have the most fantastic product in the world, but if there are not enough people who want to buy it at the price you want to sell it, you are in big trouble. Just because there is a gap in the market doesn’t necessarily mean there is a market in the gap. Find out first what people want and then offer it to them. And don’t just ask your friends what they think of your idea -they are bound to say it sounds great.
Use the internet to find out what people are looking for. Go to adwords.google.com and click on Tools and Analysis, then on Keyword Tools. It will tell you how many times people have searched for a particular word on Google, the search engine, in an average month – both in the UK and worldwide – and is a fantastic rough-and-ready guide to how many people are interested in what you are selling. On average 110 people in the UK searched for indoor orange trees each month over the past year, for example, whereas 4,400 people a month were looking for fish tank stands.
Deadly sin #2: Overspending on advertising
Too many small businesses waste huge sums of money on advertising because they think that it is something they should be doing without giving it any more thought. They take a small ad in the back of a glossy magazine at a cost of perhaps £3,000 a year, and then they sit back and hope for the best. Unfortunately, with so many adverts competing for readers’ attention, it is likely to be money down the drain.
Spend time on PR instead. If you are prepared to think creatively, there are many ways of bringing your product or service to the public’s attention for free or little cost. Contact your local newspaper or the trade magazine that covers your industry and see if they want to write about you. Offer a prize for a competition at your town’s summer fete, sponsor the cricket team or a float in the local carnival. And get stuck into social media – create a Facebook page, open a Twitter account and join Linkedin.
Deadly sin #3: Making yourself indispensable
If you have started a business from scratch, it can be easy to think that you are the only person who can make a decision or carry out a task. But as your business grows, you will quickly find yourself with so many things to do you can hardly keep up, and you will start to fall behind with your accounts, the sourcing of products and so on. As a result, your business will be stifled.
Delegate. Write a manual for every single task you perform in the company, from answering the phone to filling in an invoice, no matter how trivial it seems. Then delegate or outsource them. That way you can be confident that the business will continue to function if you are not physically there – and you will be able to clear some head space to think about the bigger picture of where your company is heading.
Deadly sin #4: Not charging sensible prices
Many first time entrepreneurs undercharge for their goods because they lack confidence and undervalue their time. But selling things too cheaply is counterproductive because customers think they are getting an inferior product or service and will be put off.
Look at what your competitors are charging and then work out where your products and services fit into the market. If you find this hard to do, then ask someone else – a fellow business owner, an advisor, or your accountant – to help you. Remember, being in business is about projecting confidence, and if you are being meek about yours, it will not be around for very long.
Deadly sin #5: Not making the best use of technology
It is tempting to think that because you are a small business, you can act in a small way. Nothing could be further from the truth. Investing in up-to-date technology in the form of efficient phone systems, search-engine optimised websites and so on does not cost a fortune and can spell the difference between a customer bothering to contact you or not.
Get a website and make it as user-friendly as possible. Send your existing customers regular e-mails, perhaps in the form of a newsletter. Improve your telephone systems so that customers get through first time. If you don’t know how to do any of this yourself, enlist the help of someone who does.
Deadly sin #6: Not setting goals
If you don’t know what you want to achieve, you will never get there. So set goals – and don’t set your sights too low. You need to set yourself a challenge and then pour all your energies into achieving it.
Set yourself a goal of a certain level of annual turnover and then work backwards -break it down to work out how many sales you will need to have each month, each week, each day, to achieve that turnover goal.
Deadly sin #7: Having a great idea and not doing anything about it
Procrastination stops 99% of would-be entrepreneurs from taking the plunge… Don’t let that be you.
Stop waiting for things to be perfect before starting your business -they never will be. Do not wait until the economy is better, or you have moved house, or got fit, or saved more money, or until your children have left home. The chances are you will end up procrastinating forever. The right time to start your business is now.
Lucie Storrs, 38, is the owner of Period Features, a shop and mail order company based in Leek, Staffordshire which provides the finishing touches for period homes from paint to lighting. She admits to committing all the sins apart from the last one. Fortunately, she realised her mistakes in time and her business, which she started in 2001, now has five staff and a turnover of more than £250,000.
She said: “I had been running my business for about six months when it slowly dawned on me that it was not going to work. There were days when we didn’t take any money at all, and I could so easily have gone under. But I decided to find out what was not working and then change it. As I started trying out new ways of running my business I realised there is a solution to every problem.”