When it comes to starting a small business, many people make huge mistakes that doom the operation from the beginning. This is obviously affected by the type of business that you are running, but many of the general mistakes can be applied to a wide variety of industries.
If you are deciding to go into business for yourself, you probably have a good deal of confidence in the industry or market in which you are operating. This is a definite factor and a big plus for your company. If you are trying to start a business doing something that you have no clue about running, the learning curve is harsh and unforgiving. Don’t get me wrong, taking chances is usually the way to get ahead; just don’t get in over your head in a trade that you know little about.
On hand cash is a major downfall for many startup businesses; the lack thereof is the problem. In general, you should not plan on making a profit for at least six to twelve months into your operation. This is dependent on your type of business, but is a good rule to follow. You must make sure that you have the capital to operate for this period of time without having any positive cash flow. Paying your employees, rent, purchasing inventory and buying or leasing necessary equipment is a major consumer of the company’s cash flow in the early stages.
These expenditures never disappear, but in time your company should be bringing in the cash to maintain these costs, with money left over to grow. The key factor is realizing that the positive cash flow will take some time to generate. Buy having the reserves for at least six to twelve months can be the difference between getting off the ground and closing your doors.
Growing too fast is another major downfall for the upstart business. Of course, everybody wants their business and profits to grow. The key to pulling off proper growth is patience. I have personally witnessed many businesses going out of business because of this fact. You are in the position to grow because you are doing something right to start with.
When a company grows too fast it can cause the quality of your services to decline by not having a true grasp on the growth of your company. The details are missed, the proper personnel are not up to par as your core group was, you start cutting corners to maintain deadlines, ect. This can be easily avoided by planning your growth in a detailed and maintainable fashion. Be sure that you have a grasp on where you are going and how you will obtain that objective in the same manner that your success was accomplished in the first place.