New Businesses

The Main Mistakes of New Businesses

New businesses are launched daily. Yet, only a few of them keep operating after a year, for example, you can check out or the Netflix platform. The reason is that they make mistakes, and these are the worst of them.  

Not Thinking About Sales at the Start-up 

Many aspiring entrepreneurs think that their goods or services will be sold easily. And they don’t have to do much about it. Simply because they are of excellent quality. But you know that good things sell themselves without any advertising. So, business owners think about sales only after they have rented and equipped an office, hired staff, running production or purchased goods. 

As a result, costs are accumulated, and the counter financial flow that covers them, there is no very long time. If he fails to wait for it, he has to close the business because the money supply is not enough.

Putting Out a Product Without Reference to the Needs of Future Customers 

New Businesses

Most often a business is conceived on the basis of what the founder has. These are skills in a particular area, access to lucrative procurement, or availability of some resources. In this case, few people ask themselves with a sufficient degree of seriousness the question – will there be a demand for what I’m going to offer the market?

Sometimes this demand seems to be self-evident: a lot of people need this. Often the value of the product for its supplier seems more than obvious because it allows to solve a seemingly pressing problem. 

As a result, it either fails to break through the numerous competitors, or it fails to communicate the value of the product to consumers. It happens that the problem that the product helps to close seems to exist, but there are other ways to deal with it, and consumers have long been used to them. So, creating a need for the product is difficult and financially costly. 

Thinking Your Money and the Company’s Money Are the Same 

This happens all too often when the business is settled, there is some progressive financial flow, and the founder starts to think that he can finally relax. There is nothing wrong for him to use part of the money that came into his corporate account for personal purposes. Buying a new car, for example. The logic he follows is simple: “The firm is mine, so is the money”.

As a result, there are cash gaps. And attempts to eliminate them often lead to fatal consequences. When, for example, to cover debts to counterparties, loans are taken. 

Making the Business Dependent on Regular Customers

This mistake is most typical for the B2B industry. Yet, it is also possible in B2C, if you have a circle of people who constantly order a product or service.

It is known that the cost of retaining loyal customers is lower than the cost of attracting new ones. Yet, the loss of two or three large ones can be critical to the business. So, it is necessary to regularly attract new ones to ensure safety. And the base of existing customers should be periodically tested for strength.

In business practice it is customary to rely on the Pareto principle. According to it, the normal situation is when 80% of the working capital comes from 20% of the total number of regular customers. It can be said that the business is in serious jeopardy if it is found that this share of the turnover is provided by only 10 or even 5%. 

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