You can avoid these blunders, says Mark Roberts who has seen a lot of start-ups come and go
As any entrepreneur will know, starting a business is never an easy ride. You’re forced to do a lot with very little resource and are guaranteed to make mistakes along the way. Whilst that’s no bad thing – the cliché of mistakes making you stronger rings true – there are a few key mistakes you should, and absolutely can, avoid.
1) “Build it and they shall come”
The number of times I’ve seen people starting a business, building a website and then thinking this is enough to attract customers and generate sales is quite scary.
SEO is now a thing of the past – trying to get up search engine rankings as a small business is both difficult and costly and more and more business are now spending a fortune on ad words and not getting anything from it at all.
As a new businesses you have to go back to basics, get on the phone and start rattling some cages. Don’t expect sales to come to you – you have to go out and find them.
2) Not understanding the market
There are certain immediate things that any start-up must understand about their market if they’re going to have any success. These are:
· Market size – the long term size of the market
· Addressable Market – how many people you can immediately target in the short term
· Route to market – traditionally done by sales, it’s crucial here to understand how much you have to put in to get a certain number of conversion rates. I call this the ‘sausage machine’ – how much do I put in and what do I get out? A sale is great but it’s important to know what it cost to get it.
o 50 calls > = 10 meetings > = 4 Trials > = 1 sales. Cost of sale = £x
3) Paying no attention to your burn rate
I see a lot of small businesses with no idea of their burn rate – how much they spend in order to operationally survive. They will take on board a raft of new customers but then have no idea of what it takes to maintain them.
How many customers do you need to cover your costs? It’s crucial to understand what you’re spending on a month to month basis or you’ll end up making no profit.
4) Getting investment wrong
People often have a massive hang up around selling equity but you can only value a business once it’s actually worth something. It’s better to have 90% of something worth £500,000 than 100% of nothing.
It’s also crucial to have investment to get to market quickly which is fundamental for any start-up. If you’re first to market, your valuation is going to rise exponentially so it’s definitely worth considering equity financing to get you off the ground.
5) Not being tech-savvy
I can’t stress enough how important it is to take advantage of the technology available to you. One of the first things we did as a business was to find technology solutions to make our day jobs easier.
First and foremost, you don’t need an accountant – FreshBooks, FreeAgent or a similar piece of software will do everything for you and even submit all of your information directly to HMRC. Things like Office 365 make e-mails easier whilst Microsoft Azure for cloud hosting allows you to create a massively malleable and scalable platform to work from.
Don’t get caught out with expensive options when there is so much available on the web for free.