The top 6 new business mistakes business owners usually make
“I’ve got a great idea for a new business.”
If I had £1 for every time I’d heard someone looking to start a new business say that, I’d be sitting on a super-yacht right now, drinking champagne in crystal glasses. Sadly, I’m not. I’m sitting in my office instead. But with four in ten new companies not making it through their first five years, I have been wondering what top new business mistakes are common in making them fail.
These are the 6 top new business mistakes I’ve come up with. Do any of them sound familiar?
1. Getting your pricing wrong
When you start out, there’s always a temptation to offer low prices to undercut your competition. It’s a great ploy for getting customers through the door, but a bad one if you want to make a profit.
It’s much better to research the market and find out what customers or clients are willing to pay, and then to offer a good quality product or service. If you start off at bargain-basement prices, then people will treat you like a bargain basement business – and you’ll find it difficult to increase your prices and margins later on.
2. Being too trusting
You wouldn’t lend money to someone you know nothing about. So why work for them without being paid up-front?
Many new businesses fail to do credit checks on new clients, and sadly there are many out there who will take your work but not give you their money.
Also, make sure you have agreements in writing before working for a client. If you are given a lot of work and you need to hire people, then make sure you have a written contract that has been checked through by your lawyer.
3. Talking about your needs, not your customers’
This is so common, even among established businesses. If you trawl through lots of small business websites, you’ll find many of them talking about the things that interest them as a company – how big their team is, when the company was founded, how many years’ combined experience they have.
Customers and clients rarely care less. Instead, focus on what their needs are – quality, service, price, aftercare, benefits and exclusivity to name but a few. Remember, as advertising legend David Ogilvy used to say, ‘you can’t bore people into buying your product; you can only interest them in buying it.”
4. Trying to do it all yourself
The old adage, ‘work on your business, not in your business is as true today as ever it was. And when you are starting out, the temptation is to do as much as possible yourself to cut costs.
But is it sustainable? If you want to grow your business, do you really want to be spending hours doing your own bookkeeping, building your own website, writing your own advertising and managing your own HR? If you outsource these and other tasks to experts, you’ll get better results and more time to grow your business – and this should more than pay for the extra expense.
5. Having no goals
When someone says ‘where do you want to be in five years’ time?’ it takes you straight back to the days when you were being interviewed for your first jobs. But it’s a valid question, especially when you ask it of your business. What turnover do you want to achieve? How many clients do you want? Which markets do you want to be active in?
Without clear planning, your business is effectively drifting without a rudder. Decide where you want to go, make a plan, and don’t be afraid to adapt it as your business grows.
6. Poor financial planning
As an accountant, this is where I see the most mistakes. Businesses have come to me with no idea of how to make their operations tax-efficient, how to access R&D grants, where to go for commercial loans, how to offset losses against tax and much more.
We’ve helped many of these firms turn themselves around, simply by giving them good advice, quality service and – because we’re nice people – by acting as a critical friend, often in the role of an ‘as-needed’ finance director.
Contact THP today
If you’re running a new business, do these 6 mistakes chime with you? Or are there others that have held you back? Let us know – and if you would like friendly and impartial accountancy advice, be sure to get in touch.
About Mark Ingle
Owner-manager business specialist, Mark Ingle is key to building relationships with clients at the Chelmsford office. “I like to see clients enterprises grow and succeed.” Mark explains, “The team here has a lot to offer and I can see a lot of new businesses responding to that.”
Having worked for accountancy practices in London and Essex, Mark has worked with a range of companies varying in size. For Mark, THP stands out for its “local firm approach with the resources of a larger practice.”
Although a keen traveller, Mark is focused on giving his clients at THP the highest service, “Right now, I aim to help the clients we have to the best of my ability which will help me attract more of the right clients in the future.”
Mark’s specialist skills:
- Annual and Management Accounts
- Tax and VAT
- Strategy and Business Planning
- Marketing and Sales
- Business Development