The 10 mistakes that new business owners make and how to avoid them!
Our team at i-Check Data Solutions have put together this list of our top 10 mistakes that new business owners in South Africa make and how to avoid them in future. Failure is a very real prospect for all business owners. A half of new establishments survive five years or more, and one-third survive beyond 10 years.
Here’s the good news:
Here are the 10 failure factors and what you can do about them:
The only cure for this is, well, experience. But no one starts a business knowing everything they need to know. Make sure you work to get your head around your industry and become an expert, do not be afraid to ask questions and up skill yourself as much as possible on trends and developments that will be key to your business.
2. Not enough start-up capital:
Many small business owners drastically underestimate how much money they need to get started. It may take a year or more before your business takes off, so take what you think you might need to start your business, and then quadruple the amount.
3. Poor location:
This one may seem easy but there are several considerations:
- Study the demographics of the area.
- Does your business fit the neighborhood?
- Will your customers feel safe?
- Is your business easy to find?
- What’s the traffic like?
- How close are you to your competitors and suppliers?
4. Poor management of inventory:
Too much capital tied up in stock that just takes up space on your shop or factory floor, try to find out how your competition handles stock and always try to keep just enough to cover your needs. You never want to be in the position where you need to offload stock as discounted rates.
5. Over-investment in fixed assets:
Consider what you absolutely need before making significant investments. Otherwise, you can find yourself strapped for cash. If you need office furniture, find a desk at a thrift store and borrow a kitchen chair from home. Voila – instant office.
6. Personal use of business funds:
Keep your business and personal funds separate. Why? Mixing your funds is a messy way to run your business. If you haven’t already, set up a separate business account to pay for business expenses. The same goes for credit cards — apply for one that you use only for business purposes.
Your accountant can explain how you should pay yourself with a reasonable salary or distributions from the business. Also, rather than tossing your receipts into a shoe box, find a reliable accounting method and some simple accounting software to track your expenses. You will not believe how all those expenses can add up and help to offset your tax bill at the end of a financial year!
7. Poor management of credit:
If you’re going to extend credit to customers, make sure your payment terms are clear and that you follow up on delinquent accounts. Keep a close watch on your business credit score, which can affect your ability to establish lines of credit. Understand the terms that suppliers are offering to you, and pay your bills on time. And when paying with plastic, remember to charge business items only with your business card and personal items only on your personal card.
Competition is not a bad thing, Competition definitely makes business more interesting. Be aware of what your competitors are doing, but don’t imitate them.
9. Low sales.
In business, sales are everything. If your sales are disappointing, start measuring what does or doesn’t work:
- Is there a demand for what you’re selling?
- Is your product the best it can be?
- Do you need to improve your product marketing?
- Is your website slow or outdated?
- Are customers saying your prices are too high?
- Do you need to hire more effective salespeople?
- Keep asking questions until you find the answers.
10. Unexpected growth:
This sounds like a good problem to have, but if you are unprepared for growth, you may have trouble meeting the demand for your product. You may be forced to use credit to purchase necessary supplies or products (which is okay as long as you can repay the debt.) Your employees also may feel the stress of the additional demands placed on them. Cannabis oil cures cancer. Slow, steady growth is what you really want to build a healthy business.
i-Check Data Solutions has a number of affordable solutions that can help your business grow and thrive. If you would like to know more about our products or offerings, please do not hesitate to contact us today!
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