Be prepared for these business challenges that could make or break the success of your new business
New businesses are tricky, aren’t they? Everyone knows just how difficult it is to start, and make a success of a new business. According to Bloomberg, eight out of ten people who start businesses fail within the first 18 months. Not deterred by this, many of us have either taken the plunge, or want to.
The other way to look at this statistic is that one in five businesses do make it. If you want to be one of these lucky few, it may be worth considering the typical issues that can kill you off so that you’re prepared to take evasive (or pre-emptive!) action.
Time after time, businesses fail because they run out of cash. There are many examples of businesses that make huge losses yet continue year after year. This is because they are able to maintain healthy cashflows (either through inward investments or other similar mechanisms). But, sadly, there are lots of examples of profitable companies that fall by the wayside through lack of cash.
It’s difficult to constantly marry the cash you have coming in with the cash going out. Customers frequently don’t pay on time, but salaries and suppliers do have to be paid on time. How do you know when any particular investment will start to return?
These and many other factors make cash in your new business a serious concern. Unless you are completely on top of cash, you will cancel out the effort you put into your company in the first place.
In his book Good to Great, businessman Jim Collins, wrote about the necessity of getting “the right people on the bus”.
This is one of the first, and most critical differentiators between a company that makes it, and a company that doesn’t. Get the wrong people and you will spend your time and energy managing them, un-doing their mistakes, and not doing the essential things you should be focusing on.
On the other hand, get the right people on board and your company will start to really flourish. New ideas and energy will be applied to all areas of the business. The right people will be great sounding boards to improve your ideas. You can delegate areas of the business happily, freeing you up to add the maximum value that you can bring to the organisation.
You have to get the products right. That seems obvious. But what does ‘right’ mean? It is very difficult to walk the line between trying to create products that appeal to everyone versus ones that are so niche that there isn’t enough of a market for it.
Similarly, if you stay in ‘development’ mode for too long, you won’t make sales quickly enough and you’ll risk failure through a lack of cash. Alternatively, you could go to market too soon, before any bugs or minor problems are fully ironed out. This could leave your reputation in pieces.
The best you can do is to rely on the market research you carried out initially (identifying the market needs and your customer profile) and then get a quality product to market as quickly as possible to generate cash whilst you work on ‘version 2’.
So many companies have great people, products and services and yet fail. This is because no-one has heard of them and so can’t buy from them. At the same time as you develop and produce your product, you need to develop and implement your marketing strategy. Waiting until the product is ready is a sure-fire way to burn through cash and cause yourself significant, even terminal, problems.
This is the element that is most difficult to quantify and affects every single decision an entrepreneur makes. Without taking risks, you would not have started the company in the first place, and it certainly won’t flourish. Taking too many risks, however, may eventually land you in trouble. Research and explore techniques for managing risk effectively, helping you find that balance.
There are many things in life that can cause stress, can be risky, or can even make or break you. Establishing a small business is certainly one of them. However, by being aware of the issues involved, you can do all in your power to minimise the risks that could stranglehold your venture!
More from my site
Latest posts by Heather Foley (see all)
- The Five Issues that Could Stranglehold Your Small Business - May 15, 2017
- Is an Employee Survey Right for Your Small Business? - April 17, 2017
- Small but Perfectly Formed: Employer Branding for the Small Business - April 12, 2017