According to Lord Young’s Report on Small Firms (released in February 2015), there has never been a better time for entrepreneurs in the UK to start their own business.
There are approximately 5.2 million small firms in the UK at the moment (and rising), and these industrious, forward-thinking businesses account for 48% of employment and 33% of private sector turnover.
In fact, 19 out of 20 firms in the UK have a workforce of fewer than 10 people, and the momentum seems to be gathering pace, not slowing down. SMEs are the backbone of British productivity.
But for every one that succeeds, there are plenty of small businesses that fail, and for a variety of different reasons. Hindsight may be a wonderful thing, but in business it’s foresight that you really need. And learning from the experiences of others is a great way of avoiding those common pitfalls that could make the difference between success – and failure.
Get on top of your accounts straight away
Right from the outset, you need to get a grip on your accounts. The early stages of setting up a business can also be the most expensive – everything from printing business cards, paying for a domain name, finding premises and even getting a business telephone number to separate work from personal calls (if you’re working from home) will decimate your start-up capital. Looking after the pennies and the pounds will look after themselves is a business truism that needs to be at the forefront of your planning during those early days.
Having a bookkeeper and an accountant to help guide you through your accounts and finances is an excellent move for ensuring you are aware of exactly what is going on with your accounts. Alongside support from and accountant of bookkeeper using good quality online accounting software such as Sage One accounting allows you to efficiently and easily keep your accounts up-to-date and make sure you remain aware of the state of the finances at all times.
As Sage One software is cloud based, you are able to allow your accountant or bookkeeper to see changes you have made in real time ensuring everyone is on the same page. The software is also available on a number of devices including PC, Mac, Linux, iPad, iPhone and Android making it easy for everyone.
Having the right tools and support is essential to really keep a close eye on your in-goings versus outgoings. If the latter exceeds the former, you will, eventually, fold. Good software and the support of a good bookkeeper or accountant can make you more aware of the state of your business’ finances helping in the first steps to success.
Get some start-up capital behind you
Starting a business with debts on the books is going to make long-term success and profitability even harder to achieve. But remember:
“It’s almost always harder to raise capital than you thought it would be, and it always takes longer. So plan for that.” – Richard Harroch, Venture Capitalist and Author
Every penny of your start-up fund matters. Although having the ability to gain financial support from friends and family, credit cards or bank overdrafts is a definite benefit when you are first starting out it is imperative that you plan your finances vigilantly to try and prevent, or prolong the need for these crutches.
Keep your business lean, ensure you are attentive about what is coming in and out of your finances so that you can make the most out of your capital. Where possible minimise start-up costs (and don’t be afraid to cut back to the bone if necessary), and maximise your profits from day one.
Investment leads to more profit
While vision, ambition and a desire to succeed are important, the only things that matter at the end of the financial year are those bottom-line numbers. Start off by understanding how the turnover/profit ratio can give you a clear indication of how well your business is doing.
Every penny you invest in the business needs to show a return. The term ‘ROI’ or ‘Return On Investment’ needs to be your business mantra. If you cannot measure the amount of return you get back on each investment then you are potentially losing money, putting your business’ future at risk. There’s no ‘treasure without measure’, so make sure you can measure every penny, and get as much value out of your investment capital as possible.
Have a long-term vision
If you lay out a clear path at the beginning of your venture and stick to it, ensuring that you have made provisions for the unexpected you hopefully won’t need that Plan B. Business success requires commitment – as Apple co-founder and CEO Steve Jobs once said, “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”
If your Plan A fails, take the learnings (both positive and negative) you have gathered during your first attempt and utilise them to improve your business’ performance in your Plan B.
Never forget about your customer
Whether you’re providing a service or a product, it’s crucial not to lose sight of your ‘end user’ or customer. Listen to what your customers actually want, rather than trying to tell them what you think they need. If your product is the wrong colour, change the colour. If your service is lacking in a particular area, address that shortfall as a matter of priority and remember:
“User experience is everything. It always has been, but it’s undervalued and underinvested in. If you don’t know user-centered design, study it. Hire people who know it. Obsess over it. Live and breathe it. Get your whole company on board.” –Evan Williams, Co-Founder, Twitter
Network with local businesses
Get to know your local business community. Small businesses tend to support one another, and ‘networking’ is still one of the best ways to make important business contacts in your immediate area. Events such as the Federation for Small Businesses ‘Business Breakfasts’ are a great place to start.
Invest in Marketing that delivers results
Marketing is important but what is more important is ensuring that you are investing in marketing efforts which are truly going to deliver results for your business. Having an online presence is essential. A good ranking within the search engine’s rankings, achieved through solid Search Engine Optimisation (SEO), and where appropriate accompanied by Paid Search (PPC) is essential for getting the word out about your company and what you offer.
A part of being successful in the online space and ranking well within search engines is having a well-designed, user friendly website to ensure you are getting the most of any potential customer that lands on your site.
When it comes to social media it is important to invest time into the right platform for your business. If you are in a creative area it will be important to focus on Instagram and Pinterest as well as the bigger platforms. However, for a finance business it may not be worth the time and money spent investing in these more visual platforms and it would be better to focus on the platforms that have a large proportion of your target audience so that you can generate leads and new business through the social efforts.
Social media can be effective alongside your other marketing strategies. However, it is fundamental that you consider what the ROI will be on the time and money put into the right platforms. If you are not generating a good ROI it is crucial that you don’t give up but instead, re-look at the processes and change the strategy to get the most out of the opportunities both online and on social.
When it all seems like too much hard work, you’re awake at three in the morning trying to balance the books and the sales numbers are down for the third month in a row:
“Never, never, never give up.” –Winston Churchill