4 Startup Mistakes to Avoid in Your First Year in Business
The first year of your start-up comes with a million learning curves. Especially if you have never started your own business before, there will be many challenges that you have to overcome.
We have compiled some of the most common small business problems for you to avoid in your first year. Use this small business startup help to ensure that you have set yourself up for success.
Failing to Create Business Goals
Failing to create goals means that you have not set a direction for your business that you can set yourself up to work towards. Business goals are useful for guiding both your long-term plan as well as your day to day operations. During the first year being in business, it can feel like you are constantly planning all the details. Your financial plan, your sales plan, your marketing plan and your overall business plan will be a lot easier to create and will be more cohesive if they are designed to reach your business goals. Goals should be used to direct your operations, and you will be less likely to get off track.
The goals that you set should be SMART goals (specific, measurable, agreed upon, realistic, time based). Set a variety of goals for the next few years across all the departments within your business. Whilst business plans need to change to cope with the changing business environment, business goals can remain relatively stable.
Overspending or Underspending
One of the most common small business problems that generally occurs in the first year is to overspend or underspend. This is surprisingly easy to do and all depends on what you expect it takes to start up a small business. If you believe that you need to invest significant amounts of capital in order to get the business off the ground and into profit then you are likely going to overspend. This can happen when you buy expensive assets, move into the newest offices in town and consult with leading (most expensive) experts. Generally, there will always be cheaper options available that will suit your needs just fine. You can always improve and upgrade in the future once you have established yourself.
On the flip side, some new business owners underspend. They are scared that if they invest significant amounts of money that they might not be able to recover it if the business fails. Whilst you don’t necessarily have to put all your savings into your new business, you generally will need to invest some capital in order to create a successful business.
Not Monitoring Your Cash Flow
Flowing on from the overspending/underspending mistake, one solution that can help you determine how much cash you should be spending is to closely monitor your cash flow. When tracking your financial statements, it is important to look at your cash flow as well as your profit & loss statements. Profit & loss does not tell you anything about your liquidity. Therefore, you could have a lot of profit tied up in future payments and assets, but no money to pay your bills for the month.
Once you are across your cash flow, you can forecast when it would be better to spend money and when it would be better to save for future expenses. While it is important to invest in your business, sometimes it is better to set up an emergency fund that provides a safety blanket and reduces your need to borrow money. As you monitor your cash flow over time, it will become easier to make these decisions as you understand the trends of your business.
Blindly Following Advice
Now we’re not saying that you shouldn’t seek expert advice when starting up your business. You should definitely look to others who have experience and knowledge in areas that you don’t when setting up your business. For example, if you have no experience creating financial plans then you will not be able to guess at how to do it correctly without talking to an expert or doing some research.
When we suggest that you don’t blindly follow advice, what we mean is that when you receive advice from people with expertise, make sure that you do your own research to know exactly what they are talking about and whether you think it will add to your business. You know your business much better than anyone on the outside will. If someone has given you advice that you’re not so sure about, then conduct some of your own research. Look online, survey your customers or ask other experts and then determine whether their advice should be followed.
For more advice for a successful first year in business, make sure you read our small business start up checklist.