Starting your own business venture is a tempting thought. You can be your own boss instead of being hectored around. Yet, being your own boss is no easy task. To begin with, one of the biggest challenges that new entrepreneurs face is to convert the idea into a profitable business model. Have you done sufficient research? Should you approach a venture capitalist or a bank to fund your business? How much time should you give to your business to start churning profits? Is it a time to start a business or wait till you gain the required experience?
Experts say that the first year of a venture is the most crucial. It can make or break the business. You make one mistake and it will run over the business. We look at some of the common mistakes that fresh entrepreneurs make in their first year of starting a business. Find out how you can avoid doing so.
Not doing adequate research
There is no dearth of ideas and types of ventures that you can pursue. However, the tough part is testing the hypothesis—converting your idea into a viable business model, which is not possible unless you have done sufficient market research. Whether you decide to do it formally or informally, you will need data on the size of the potential customer base, competition and external business environment, to be able to clearly define your revenue channels.
Moving ahead on flawed assumptions
Even thorough research can't guarantee success . There could still be a few bugs in your business model, often in the initial financial projections and the whole business math around it.
A simple solution is to beta test your prototype to find and fix the faults before the product is launched. This is also a great way to get feedback from users. It always pays to go back to the drawing board if the feedback is negative
Scaling up too early
After the business has been launched, the entrepreneur starts looking for growth. Even if you are able to generate a lot of consumer interest, you ultimately have to scale up the business to make it grow. When you test a prototype or launch a product in a small market, the results are based on a limited experience. However, this changes dramatically when you actually begin operations or reach out to a wider market.
Moreover, scaling up requires deep pockets. You have to hire people, lease office space in a few cities, tie up with other businesses and market your product. If you don't have the necessary funding required for this, the business will fizzle out in no time. Experts, therefore, advise to nail it first and then scale it up—start small, have short-term goals, perfect the product and the revenue model, and then scale up.
Not keeping tabs on expenses
Keeping the overhead costs low is essential for a start-up . Whether it is on furnishing the office or buying machinery, you have to be as frugal as you can be
Another area where you can cut costs is while building your website. If you are low on budget or just need a basic website, you can use various platforms available on the Net to create it. Also, while there is the constant need to meet clients, do not spend heavily on it. Talk to them through video conferencing or meet them in their office. Then, there is the challenge of sticking to your seed capital and reining in every expense to ensure that you do not go overboard.
Underestimating manpower needs
The golden rule of entrepreneurship is not to waste time on something that can be done by someone in a faster, better and, perhaps, cheaper manner. To run the business, you need a team that can take care of various peripheral aspects and leave you with the core functions.
You can also tap your professional network for expertise. Whether you hire full-time employees or work with consultants depends on the kind of industry you operate in. In an e-commerce industry, hiring full-time workers always makes sense if the finances allow it. Although you do not see your customer, there must always be people who can handle their grievances quickly . Nothing will kill an e-commerce faster than bad customer feedback. But if you are short on cash, or your monthly operations are not generating enough cash to sustain employees , it is advisable to start with consultants.
Not maintaining a financial buffer
Many people hesitate to start a venture because they are the sole breadwinners for their families and the loss of a regular monthly income can pose problems. A working spouse can ease the pressure. The gestation period of a business venture can be long.
This is why you must estimate how long it will it be before the business can earn money. Experts say you should have a contingency fund to take care of 6-8 months of expenses. Try to reduce the risk in your portfolio and stick to a conservative mix.