The start-up stage can be one of the most vulnerable times for businesses, particularly those on a smaller scale. While being your own boss is a lure for many aspiring entrepreneurs, starting a business should never be taken lightly.
Even after trading for several years, these risks can continue to threaten small businesses.
Product or service issues
Large companies can suffer from focusing on the wrong product or service, so small businesses have even less room for error.
What you provide is the core of the business and is probably the most essential component to get right. If your product either doesn’t address a profitable market, doesn’t have a unique selling point compared to its competitors or is just of poor quality, it will struggle to make a positive impact. Although it seems obvious, businesses fall at this hurdle more often than you’d expect.
Thorough market research into what problems customers experience and the solution they would look for can be a massive help in getting the product right.
Cash and funding problems
Businesses need cash, both to start-up and maintain their operations. Even after a business has raised the start-up capital; outgoings need to be monitored to make sure you’re only spending what you need.
Whether you’ve chosen a supplier that’s out of your price range, your rents are too high, or you’ve just bought something for the sake of it, the start-up years are a tender time for finances. You’d be best only spending what you need, and making sure you charge enough for what you do that it will keep the business afloat.
Once your business is no longer able to cover its outgoings, it is insolvent, and if you find yourself in this situation, you should explore insolvency options, such as administration or a company voluntary arrangement to avoid forceful closure of the company.
Marketing mistakes
Marketing is one of the hardest aspects of running a business. There is a full sector of experts and courses dedicated to getting marketing right, and it can be daunting for the inexperienced. Many companies either get the marketing wrong or stay away from it, afraid of making mistakes. Doing so puts the company at a significant disadvantage, especially in the age of the internet where marketing is such a crucial component for success.
If you want your business to succeed, you need to get its name out there. Even just having a social media presence can help. If you’re able to, hire someone in the know to handle your marketing.
Lack of planning
Despite almost all business advice suggesting you draft a business plan before trading begins, some start-ups and even established companies still ignore it. Business plans don’t just serve as a guide on how to make money. Appropriately used, business plans are a guide for growth and provide goals for your company to work towards. Just seeing how it goes without any defined goals to work towards rarely ends well.
Even if a start-up or small business has a period of success and high profits, how it puts that money to use also needs planning. If cash flow is healthy and your profits are looking tidy, it’s very easy for companies to start spending on staff or benefits that either it doesn’t need or can’t maintain if a client backs out or doesn’t pay on time.
Cybersecurity
Technology has opened a world of possibilities for businesses to reach new customers and much more. Sadly, it’s also opened the door to new, potentially devastating threats for companies and businesses of all sizes. We’ve all heard about company computers falling victim to ransomware, and data breaches leaking customers’ personal data. Staying up to date with the latest cybersecurity measures, industry news and data protection laws will help you stay alert as to how to keep your business safe from the threat of cyber-attacks and data leaks.
Summary
More people are choosing to set up their own businesses and work for themselves, but without considering the potential risks, your start-up or small business could find itself in trouble before it has the chance to make its mark. You can take steps to reduce the risks; make sure your product fills a viable gap in the market, ensure you have the funds to execute your idea and keep the business afloat effectively, and planning a marketing strategy. Having a clear plan for the business and the direction to take it, and being aware of the ever-developing threats of cybersecurity will also help protect your business from these threats.
