How to avoid common mistakes when setting up a business
Setting up your first business is an exciting and fulfilling experience. It’s the start of a new chapter, an opportunity to carve your own path in the business world. And everyone does so with their own unique strategy.
As you embark upon the entrepreneurship journey, you will experience a few bumps in the road. From considering your finances to fine-tuning your product or service, each aspect of your business will provide a learning process. However, some business mistakes can be detrimental.
So, what are they and how can they be avoided when setting up your first business?
Neglecting your business plan
A common initial mistake that most entrepreneurs will make is failing to create a business plan. There’s a recurrent misconception that a business plan is only useful if you are seeking investment, but this is not the case. Quite simply, it facilitates the conduct of vital research which is crucial to identify any potential pitfalls.
By conducting research, you can find solutions before problems are encountered and ultimately futureproof your business. For example, if your business plan highlights that you’re in a saturated market, you can then figure out your unique selling point to differentiate yourself.
So, set some time aside to do this research and create the plan. You’ll reap the benefits tenfold.
Failing to carefully consider margins
When venturing into your first business, you need to consider all your costs. Often, first-time business owners can get consumed with whether their product or service alone will make money. This leads them to overlook factors such as whether they will be selling direct or to a third party. If you haven’t factored this in, you may end up taking a significant hit in the future.
When launching your first business, you may seek help from several parties to begin. It’s fine to ask for help so long as you ensure that all of these parties are financially considered.
Overlooking what type of ownership will best suit your business
Don’t make the mistake of overlooking the legal structure of your company. Each structure entails different tax implications so it’s vital you spend time working out what’s best for you. Whether you’re a sole trader, private limited company, partnership or co-operative, figure out what works for you.
Sole trading will often have the lowest tax rates, but it can be significantly harder to raise money. So, finding the correct balance for you is key.
In addition to ownership, it’s important that you consider the kind of insurance you’ll need. The simplest way to do this is to find a broker that specialises in small businesses.
Not making the most of free resources
Aspiring and new entrepreneurs often fail through a lack of funds, so you can’t afford to not take advantage of financial breaks where you can get them. The cost of completely starting from scratch will most likely be quite high; from buying resources to learning how to operate software and bringing in help.
For this reason, there will be forms of help including government grants which you may be eligible for and tax breaks for investment in startups. The Regional Growth Fund is also available for businesses looking for funding of less than £1m, as well as Start Up Loans which is a government-funded initiative providing loans, mentoring and support for startups or very small, early-stage businesses. All of these contribute when you’re looking for help.
Failing to protect your business
Trademarks are vital to protecting your brand name and increasing its value, especially when starting a new business. So, ensure you don’t fall into the trap of investing all your hard work into your business to then find it’s not unique.
Although protecting your product can be costly to begin with, it’s valuable in the long run. You can keep costs low and save a few thousand pounds by writing your initial patent yourself and then handing it to a lawyer to handle. Always use a lawyer as they are the experts and can put the right measures in place to avoid others cracking your patent.
Starting your first business can be an overwhelming task. We know there’s a lot to consider when starting out so why not speak to an UMi advisor who can help you to ensure this learning process will provide maximum success for your new company.
- Conduct research around your business idea and compile all relevant information into a business plan
- Look online for any free resources that may help you
- Check that your business is unique and get it trademarked