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What are typical start up problems?
When starting a business, what are the typical problems that people run into? What's the best way to avoid these types of problems? I'm thinking of starting a business and would like to know what I'm up against.
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5 Answers
Brook,
You have received some great advise from the prior postings and all should be considered but there is one piece that I think stands ahead of the others - CAPITALIZATION. If you do not have the right capitalization you can have a great product, tons of enthusiasm and still fail. Before you launch a new business I would also take a very hard look at your business and personal financial capabilities and your personal credit scores. Getting financing in today's market for a new business will not be easy unless you have addional collateral (equity in a home or other areas), very good personal credit scores and a good relationship with both a banker and a second lending institution. Your business may hit a home run right off the bat and never have a cash flow issue but if things don't start off quite as well as planned what will be your cash reserves financially to help keep your doors open?
With this said, I cannot stress the importance of knowing your personal credit score because this will dominate discussions with banks and determine if they will give you any loan and at what price.
Good luck - it is an exciting time for you and we wish you great success.
Don
Don is absolutely right about capitalization. For a lot of businesses you should plan on having at least 6 months of operating capital which includes a livable salary for yourself. For restaurants and other riskier businesses or those with slower ROI (returns on investments), plan on at least 1 year.
Another essential is a business plan of some sort whether to use only as a blueprint for your company or a formal one if you are seeking funding. A business plan forces you to really research and know your competition so you can figure out how best to compete against them. It helps you truly define your target/niche market so you know that there is a demand for your product or service and how you will fill it. It makes you look at the risks and analyze how you can avoid, mitigate or deal with them. It should also make you assess your strengths and weaknesses and to look for other team members or employees who have complimentary skills and strengths. In addition the plan will require you to have a realistic budget and projections for the future. It can help you stay on top of the many essential details that are required for owning and operating a business. Whatever type of plan you have, make sure to keep it updated so that it is adaptable to changing needs or economic conditions. You want it to be always ready to take advantage of changes and new opportunities.
As you can imagine, there's no easy answer. Simplest thing I would say is don't try to do it on your own. The vision, the passion, the energy and the big idea has to come from you. But, chances are you don't have all the pieces, so before you get too far along, you need to validate your idea and determine where you're going to need help. The better you can validate your idea, the sharper your value proposition becomes, and from there, it gets a little easier finding the right help to make it a reality.
Hi Brook, Great question.
(and tricky to answer in a short paragraph!) I would turn the question around if that's ok to say, what are the keys to making a new business successful? My response assumes start of solo-preneur business, needing no external investment, but would apply to other businesses as well.
- Have a vision of where you what your business will look like in 12-24months
- Know your product or service
- Be crystal clear who your ideal client is and then ensure they need or want your product/service and are prepared to pay for it.
- Give yourself a goal for the first 3-6 months and put a plan around it.
- Be flexible, often small businesses need to change/flex according to market, costs, or sales
- Know what you know, and what you don't know! Get other people to work with you on the 'don't know's', don't try and do everything yourself
- Enjoy it and celebrate successes (especially small ones)
A few common pitfalls I see that clients of mine have fallen into are:
- launching their business with tons of enthusiasm and passion, and then realising they don't really know who their clients are or whether there is a real market for their business
- having a great idea for a business and then getting quickly overwhelmed by where to start and how to do things (websites, marketing, client management, planning, finances, business structures)
- Launching into the details, without thinking about the goals and how to broadly reach them.
Hope this helps.
Best
Liz Luya
Hi Brook, Great question.
(and tricky to answer in a short paragraph!) I would turn the question around if that's ok to say, what are the keys to making a new business successful? My response assumes start of solo-preneur business, needing no external investment, but would apply to other businesses as well.
- Have a vision of where you what your business will look like in 12-24months
- Know your product or service
- Be crystal clear who your ideal client is and then ensure they need or want your product/service and are prepared to pay for it.
- Give yourself a goal for the first 3-6 months and put a plan around it.
- Be flexible, often small businesses need to change/flex according to market, costs, or sales
- Know what you know, and what you don't know! Get other people to work with you on the 'don't know's', don't try and do everything yourself
- Enjoy it and celebrate successes (especially small ones)
A few common pitfalls I see that clients of mine have fallen into are:
- launching their business with tons of enthusiasm and passion, and then realising they don't really know who their clients are or whether there is a real market for their business
- having a great idea for a business and then getting quickly overwhelmed by where to start and how to do things (websites, marketing, client management, planning, finances, business structures)
- Launching into the details, without thinking about the goals and how to broadly reach them.
Hope this helps.
Best
Liz Luya
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