​​Starting a Business

1. Market demand

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The most common reasons startups fail is because they create a product or service for which there is insufficient market demand.

​Starting a business needs to be a completely objective decision – it’s not a case of following your passion. You need to dispassionately assess whether the product or service you want to sell is something people want to buy. Yes, there is space for fun, passion and fulfillment - but you can guarantee that those things quickly disappear if the business isn't making sales.

2. Lack of preparation

Business can be fun, even thrilling at times, but running one mostly requires vision, rationality, objective thinking, financial skills and interpersonal skills. Prepare a comprehensive business model before you start your business, to keep you focused and true to your end goal. Your business model should be around 30 – 40 pages, and should cover your product offering, projected expenses and turnover, market analysis, funding requirements and an analysis of your cash flow. Do not skip this step.

3. Lack of focus

Understand right now that building a company takes time, effort, money and focus. You need to dedicate a huge amount of time and effort to it, and avoid getting distracted by other business ideas.

4. Not having enough money!

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In the beginning of your business life cycle and for much of the first few years, cash flow is an issue. You need to surround yourself with a team of professional experts, one of whom will be an accountant. Learn as much as you can about cash flow, financial calculations and keeping your business expenses down. Ask yourself the following questions:

• What are my profit margins?

• What is the minimum turnover I need per month to survive?

• What will next month’s expenses be – have I prepared for those?

• Am I spending enough on marketing?

• Do I have my liabilities under control? (Like the debtor’s book, and my own debts to suppliers/lenders) *

* While technically, in accounting terms, a debtor’s book (aka “Accounts receivable”) is viewed as an asset, in practical terms, that’s B.S.

Clients who have not paid your bills are a serious business liability which you need to fix urgently.

At the same time, also be aware of what your business needs to grow. If you are running on a shoestring budget, you may be surviving, but without excess cash, it is difficult to get to that next step. If you can get access to funding and are capable of repaying it, consider doing so. Consult a financial expert (not just one trying to sell you a product) to determine whether your business needs funding, and whether it should risk seeking funding.

5. Not having the right people

Starting a business with someone is more serious than a marriage. Your team can make or break your startup, and having the wrong partners or employees can destroy your business. Make sure you hire the right people – get a qualified recruiter to assist you with the process. They are experienced in psychology, human behaviour, and spotting positive and negatives aspects in candidates.

If you're partnering with someone in business, first ensure that your fundamental goals and beliefs align. Ensure that you get a properly-drafted partnership or shareholder’s agreement drafted – we’ve lost count of the number of clients we’ve had come to us trying to fix a dispute with a business partner.

6. Not having the right team behind you

If you don’t have the right employees and partners, your business will not succeed. Similarly, without a team of experts, you will run into financial, legal and other problems. Get an accountant to help you with your finances, get us to help you with legal cover, and get a business coach and even therapist if necessary.

Have a look at our Business Plan product for startups and small businesses. It gives you the contracts and advice you need to run your business safely and is easily affordable - even for startups. Find out more here.

7. Product quality and the competition

Business is brutal. Unless you have a rare, completely new product or service, you’re most likely entering a market already of competitors offering the exact same thing you are. That should not put you off, but it is a warning to ensure that your product/service has some aspect to it that makes it stand out in the crowded marketplace.

In addition, you must ensure at all times that the quality of your product / service is excellent. In today’s age of the Internet and endless choices, customers have the power to choose their service provider in a heartbeat. The reputation of your business is sensitive and easily affected by an online review – so ensure your quality is impeccable at all times.

8. Poor customer feedback

Linked to the concept of product/service quality is customer feedback. Regular feedback and communication need to be integral to your business. Customers demand it, and without, you can bet they will go somewhere else in the blink of an eye.

9. Pricing issues

Before you launch your product, conduct thorough research on your competitors and their pricing. Where will your product fall on the pricing spectrum? Can it get away with being more expensive than average? Are you starting off with the cheapest price? Research the economic and psychological effects of pricing on consumers.

10. Poor marketing

Insufficient or poor marketing is a major reason many businesses fail. Understand and accept this fact right now: marketing your business is essential. If you do not market your business, it might as well not exist. If you’re one of those people who doesn’t believe in marketing, or who believes marketing is beneath you - fix your attitude right now or otherwise don’t bother going into business. Intelligent, highly educated people seem to struggle with this especially, because they tend to believe they are above sales.

If you are starting your own business, understand that you are not above sales and you never will be. In fact, you will spend much of your time in the initial years of your business personally marketing your business until you can afford to hire someone to do it for you.