Four common business start-up blunders

Making mistakes are unavoidable when starting up a business. But while they help new owners learn from their past experiences, there are some errors that can result in severe financial losses or prevent the start-up from realising its potential. Here are four of the most common startup blunders, and how to avoid them.

Flimsy business plan

Developing a sound business plan is the backbone of any start-up - think of it as a blueprint for the business you are about to build. All too often, new business owners jump into the world of social media and rush to create a snazzy new website - which is also important - but neglect to think about their plan for the future.

A poor plan speaks in general terms without giving any specifics, lacks and executive summary and fails to provide any solutions to perceived problems. A bad plan also uses outdated market data and fails to carve out a competitive niche for the firm's products/services.

A good plan, on the other hand, is specific, realistic, measurable and includes detailed research of the industry you intend to enter. It also includes a vision of where you see the business going in a few years' time, and establishes a competitive advantage. Importantly, it provides an action plan of how you will reach your business goals.
For a sample business plan and guide, visit business.gov.au.

Also see:

Not hiring a bookkeeper

Key to the survival of your start-up is good cash flow management, and if you're not good with numbers, record-keeping, forecasting and basic account reconciliation, it may be a better idea to hire a bookkeeper once the sales start coming in. This means that you can avoid the top bookkeeping mistakes  experienced by new business owners, and help you concentrate on your day-to-date business operations.

The ATO indicates that some of the tasks a bookkeeper manages are:

  • Payroll
  • Data entry
  • Petty cash
  • Record keeping
  • Bank account reconciliation
  • Accounts payable and receivable

You may also need to hire an accountant, which can be valuable in analysing the larger picture of your financial situation, providing advice and doing your taxes.

Lack of funding

You may have a great business idea and a vision of how you want to implement it but if you lack funding, turning your dream into reality can be next to impossible. This doesn't mean you need to have all the funds you need right away - it just means that you need a clear plan on how you're going to obtain it.

These days, there are many different sources of financing: bank loans, angel investors, savings, money from friends or family, crowdfunding and credit cards. It's a good idea to research the different financing options available to you first before committing.

See also:

Not researching your suppliers

Another blunder many start-ups make is not conducting research into a new supplier. There's nothing worse than putting in 500 orders than finding out the day before they're due to be delivered that the supplier has gone bankrupt, is fraudulent or simply unable to deliver.

That's why it's a good idea to assess the financial position of your supplier, through a credit check by a credit reporting agency, to help avoid any losses down the track.

See also:

Credit check your potential and existing suppliers here >>

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