The two huge mistakes you can make when starting your business are to: Deciding on a product first and then looking for customers to buy your goods is a common problem, and the reason many businesses fail. What happens is this. The novice entrepreneur comes up with a great idea for a business, stocks up his shelves, opens his doors and then nothing happens. In our town I’ve seen so many examples of this, where would-be entrepreneurs arrive full of optimism that our town wants their gift shop, book shop, candle shop solely on the basis that we haven’t already got one already.
Why haven’t we got one of these shops? Is it maybe that no one either wants or needs whatever it is you’re trying to sell them? Or if they do, perhaps there aren’t enough potential customers to make the business viable. It’s an easy mistake to make and I believe if you were to take a quick nationwide survey of everyone’s garages, lock-ups, spare rooms and garden sheds, I bet you’d find thousands, probably millions, of products that were all part of that initial great idea, which ended in failure.
To succeed you must first identify your target market and understand their needs before you get your products and services together.Not having a winning business plan is the other most common mistake made by would-be entrepreneurs.
If you go on an unfamiliar journey do you plan your route first, or wait until you’re hopelessly lost before asking for directions? I know a lot of you would say you wouldn’t plan a route, and wait until either you got lost, got lucky or gave up.
But the point is you reach your destination faster and far less stressed if you invest a small amount of time preparing and familiarising yourself with the best route.
Why Businesses Fail
There are many reasons why new businesses fail.
- Overestimating how much the business will sell or underestimating how long it will take to achieve initial essential sales targets.
- Underestimating costs.
- Failing to identify your market correctly because of inadequate market research, or no research.
- Failing to control costs.
- Carrying too much stock.
- Being personally and financially unprepared for running your own business.
Or in other words failing to have a winning business plan.
I don’t take any pleasure telling you this story, but the reason it’s important is that any one of us could end up in the same unfortunate position as that entrepreneur if all we do is follow our heart and go with the business idea that suits us most.
Unfortunately business doesn’t work this way. Before you can even think about success, you need to be able to survive. There are two important words that I want to stress in the above list of reasons for business failures. They are:
- overestimating
- underestimating.
I speak from experience when I tell you that it’s so easy to overestimate how much you will sell and underestimate how long it’s going to take to get your business fully up and running.
I believe it can take at least three years to establish any worthwhile business. So prepare yourself for a long ride.
Researching Your Idea
There are various areas of your idea that will have to be researched and looked at. The primary area that you need to concentrate on is to thoroughly research your product or service. Look at these from every possible angle.
Product Or Service
You need to be as sure as you can that either the product or service you are about to launch will actually appeal to your target market. Here’s something to think about – why was the teabag a roaring success and the coffee bag a huge flop? I don’t think anyone has actually managed to answer this one, but it does go to show that sometimes even though something similar has been an enormous success it doesn’t mean that your new idea will work too. You can stack the odds in your favour by undertaking thorough research.
Question everything about your product or service and ask yourself:
- What makes your product/service unique?
- Why would customers choose you in favour of anyone else?
- How easily can you source your products?
In the initial burst of enthusiasm for your new business venture it’s easy to overlook the question of sourcing. You need to be sure that not only you can obtain your products (or raw materials if making your own) but also that the price you’re paying isn’t subject to frequent and excessive price fluctuations.