You are very eager to start your own business. All passions come and your entrepreneur is established tomorrow with successful wishes. But, do you know that 90% of new businesses have to stop working during the first three years. I think you do not want your company to belong to this group. How to get success with your business? Here are pitfalls you need to know when starting a new business.
First trap: Being overly concerned with your customers without paying attention to your finances
Many entrepreneurs fall into bankruptcy because they focus too much on revenue and overlook the business management. To avoid this situation, you should create a tracking table that is easy to check weekly or monthly. This tracking table must include at least the revenue, profit margin, budget, the number of goods sold, costs…
Every quarter, you need to check how our customers’ demand is so that you have a suitable supply. And, you check these points:
- Have you analyzed the potential needs of your customers?
- Do you have a good distribution channel?
- Are prices competitive with the market?
For financial matters, three questions need to be asked:
- What do I earn?
- What do I pay for? And,
- How much money do I have in my account?
To do this, you should hire an experienced accountant. They will help you detect irregularities in your finances to alert you promptly.
Second trap: Don’t dare to negotiate with creditors
In the case of financial difficulties, many new business owners do not dare to negotiate with the bank. They forget that, if their businesses are closed, that bank will not get back their money. This means the bank is usually willing to negotiate with the owners.
Third trap: Weakness in analyzing customer sources giving risks to the business
It is no use when you keep running under an insolvent contract. Therefore, the essential thing is to find out the financial capacity of customers. However, when unfortunately encountering bad debts, you can seek the help of law enforcement agencies or professional debt collection companies.
Fourth trap: Depends on a client
A business goes bankrupt because the majority of its revenue depends on a key customer, so when the client switches to another provider’s service or falls into bankruptcy, immediately the business will be troubled.
To avoid this risk, you need to diversify the source of customers and have a limit that the profits from a customer must not account for more than 35% of the company’s revenue. Ideally, divide the groups of clients by type of business: one third are large enterprises, one third are small and medium enterprises, and the rests are for individual buyers.
Fifth trap: Inefficient investment
The most difficulty is not to have enough guests, the big problem is when the customers come too much. It is because if you do not have enough customers, you lose less. When too many clients come, and especially after you invest all the money, you will lose all when the bad things happen.
A rush of orders can make business owners invest heavily and hire employees massively while not taking into account financial potential as well as the ability to recover capital in the long run. This is one of the most basic causes of failure, but it is also a trap for many new entrepreneurs.
An effective way to avoid this problem is to study the market thoroughly and seriously; then, you give the investment direction suitable for your capabilities, without being embarrassed or overwhelmed when orders are pouring heavily.
Sixth trap: Trading in a single, individual manner
Some business owners cannot survive if they stand alone, do not reach out to the organizations that give them the source of customers, or do not interact with the consultants to be able to receive useful advice. Depending on the type of business items, you can join different associations; and at the same time, associate with other owners to take advantage of the distribution system and also exploit their customers.
Seventh trap: Not interested in ensuring your product or service
Many entrepreneurs are not optimally insured, so when they encounter a problem, they cannot manage it alone. Insurance is a good way to protect yourself, and risk shared with other businesses. Thus, you need to learn the different types of insurance to make the smartest choice.
What do you think about these traps? Did you get one of them? Share your ideas with us and other readers, please!
Success in your business!