40 schoolboy errors start-ups make
Every new business makes mistakes. But you need to avoid as many as possible if you want to survive.
1. Assume 'everyone will want this'. Everyone won't. Target everyone and you end up targeting no one - a massive turn off for investors and banks and a guaranteed way to waste money when marketing. Indentify your target customer then get close to them. Read our section on market research for more help with this.
2. Can't sell, won't sell. There is no business without sales. Consider joining forces with a partner who's sales driven - but don't shy away from it. If you believe in your business, prove it. Read books and our section on sales.
3. Lose focus. Resist diversifying too early, no matter how alluring the opportunity. Instead, establish a healthy customer base from the products you have spent months researching and refining before branching out and diluting your core strengths. Stick to your plan.
4. Quit your job too soon. Do as much as you can while you're still being funded by someone else. Don't burn any bridges and be careful not to infringe non-competition clauses in your contract (see our guide on when to quit your job for guidance). Avoid telling colleagues about your venture. The gossip will invariably reach your boss.
5. Don't understand the industry. Industry experience isn't essential, but industry knowledge is. Keep abreast of competition and developments by reading trade mags and websites and attending plenty of networking events. You'll get closer to your competitors, suppliers, customers and potential partners.
6. Don't tell everyone you can about your idea for fear it'll get nicked. Now this is one's up for debate, but we say: tell everyone. The more people know what you're doing, the more useful contacts friends will refer you to. You shouldn't fear idea-nicking. If your business is any good, other people will always copy.
7. Think a great idea alone is enough. Plenty of genius ideas have died sorry deaths in the hands of creators who forgot about less innovative functions such as sales, cashflow, marketing - even a plan. A great idea without any of these is a project, not a business.
8. Haven't accounted for late payments in your budget. Late payments are enough to kill a business. In fact, 40% of failed businesses attribute their demise to tardy payment. Always chase late payers and make sure you have enough cash to see you through for up to four months of overdue payment from each client, if not more.
9. Not enough market research. Fatal but sadly classic error. Don't ignore the hard numbers of your idea in an attempt to convince yourself it's viable. Is there definitely a market for your product? Are you sure? Prove it to yourself before anyone else. Check out our section on market research.
10. Bad name. You need to be findable on- and offline, and set the right tone through your name. Check out our mindmap on choosing a business name for advice.
11. Make pie-in-the-sky forecast figures. A massive turn-off for investors and banks, and potentially lethal. Make everything tangible and explainable. Anticipate spending twice as much and making half of what you hope. See our mindmap on how to make a sales forecast to make sure you stay grounded.
12. Think your sales forecasts are accurate. No sales forecasts are accurate. Don't over-rely on what you've predicted. Create best, worst and middle-case scenarios and always have a contingency fund should things go worse than planned.
13. Think big but don't think about scale. Got ambitious growth plans? Great, but be clear and realistic about how you're going to get there, and when. Think about infrastructure and choose IT systems, suppliers and distribution channels that can scale with you.
14. Don't register your business trademark early enough. This is more important than patenting as it confirms you can use your chosen name and logo. It's vital to do this before printing out all your stationary, or you risk having to re-do it at a cost of hundreds or thousands. Here's our advice on trademarks.
15. Forget to think up consistent stationary and signatures before starting. Getting everyone to use the same email signature and consistent branding across correspondence makes you look professional. It's quick and simple to decide on, too.
16. Don't user-test. Test everything. Make sure your target customers actually like the way it looks and works, and find out how much they'd pay for it. Your family and friends are not customers, by the way: they'll sugar-coat. You need people you don't know. Trust us.
17. Don't set targets. Having a vision focuses your efforts and creates structure. Your ambitions may well change but having a starting point helps immensely. Read about how to set business targets.
18. Agonise over minutiae. Does it really matter whether you use Arial or Calibri font on your invoices? Prioritise ruthlessly. Look at how many sales a piece of work is likely to bring in, and allocate your time and resources accordingly.