You've got killer ideas, fire in your belly and you're prepared to put in the hard yards – the first months of a new business venture are often highly exciting and productive.
But a slip up now could cost you not only your capital but also your confidence, your reputation and your business.
Sadly, Australian business failure rates are at a six year high, with more than 250,000 businesses deregistered from the Australian Securities and Investments Commission last financial year, most of them (87%) small businesses.
Starting a small business can be very rewarding but it is also very challenging.
So, here we're taking a look at five common mistakes that new businesses make and how you can avoid them.
1. Poor planning
Setting a business plan is crucial - it is one of the very first things you should do to help ensure the success of your new venture.
A business plan can help you focus your efforts, refine your ideas and start you budgeting for your launch.
While there are no hard-and-fast rules about what you should include, the Department of Industry and Innovation has a great template and guide that covers all the big picture stuff – your vision for the business, market, future and finances.
The most important aspects of how to make a business plan from this guide include:
· Do your research.
· Work out who the plan is for.
· Get professional help.
· Record actual v expected figures.
· Review, review, review.
Following these will get you thinking about the really important foundational details like competitor research, your marketing strategy, legal considerations and start-up costs.
“There comes a point when the only way you can make your business better is by getting it out there, finding out what works, what doesn't and learning from it”
2. Cash flow mismanagement
This brings us to cash flow.
Sadly as many as 46% of Australian businesses fail due to either inadequate cash flow or high cash use, according to ASIC.
The Victorian government offers this cash flow forecasting template and a cash flow improvement checklist, while the Western Australian government outlines some levers you can pull to improve your cash flow.
You may also want to check out our earlier blogs: Are you putting too much trust in your suppliers and 5 steps to minimise bad debts.
3. Pricing off the mark
In the global digital marketplace, pricing can be one of the toughest factors for a business to settle on.
But getting it right is essential – pricing affects how competitive you are, the kinds of customers you attract, whether your business is sustainable and how much you can invest in growing your business.
Pricing strategies you may want to consider include premium pricing, penetration pricing, skimming and going-rate pricing.
The federal government offers an introduction to pricing strategies, while Business Victoria has a guide to getting your pricing right and Business Queensland offers an online calculator.
4. Waiting too long
So far, we've focused on the importance of taking a careful and measured approach to launching your business. But there's a balance you need to strike.
Many new business owners leave it too long before they launch – they wait until they're 110% sure the product, the website and the marketing are perfect.
But there comes a point when the only way you can make your business better is by getting it out there, finding out what works, what doesn't and learning from it. As we've discussed in a previous blog, there is a silver lining to customer complaints.
5. Skimping on protection
When you're starting out, it can be tempting to think “I've got nothing to lose yet” and delay buying business insurance until you feel that there's “something to insure”.
But the reality is that your exposure to financial loss starts from day one and if you haven't structured your business carefully, you – and indirectly your family – could be personally liable for any losses.
For an audit of your main exposures to risk – both now and as your business grows – be sure to speak to your local Steadfast insurance broker about your small business insurance needs.
More often than not, they'll be able to identify risks to your business that you hadn't even considered.