The Top Ten Pitfalls to Avoid in Starting Your Own Business

1.      Not having a business plan

We've all heard the tired old clichés: "failing to plan is planning to fail" or "if you don't know where you're going, how will you know when you get there", but a business plan is a vital part of starting a business. Too many businesses start without one and try to "fly by the seat of their pants", which dramatically increases the chance of failing. A properly drawn up business plan will help you to sort out where you want your business to go and how you plan to get it there. It will also help you to clearly communicate your business idea to lenders and suppliers.

2.      Going it alone

This is probably the biggest and most common mistake that new business owners make. It's a myth that to be successful, the entrepreneur needs to be an expert in all fields and does everything on their own.

Even worse is trying to do everything yourself just to save money. At very least you will end up working incredibly long hours just to keep the business afloat. Be especially careful not to get dragged into doing all the administration work. It will take you much longer than a professional, you won't do it as well and it isn't the best use of your time. Play to your strengths.

If your business can't support this, perhaps your business model is flawed because it assumes that you do everything. When this happens you end up subsidising business by working for an hourly rate that is often below minimum wage. Don't kid yourself that it's only for a short time until the business gets on its feet. It will never get on its feet while you continue to work like that.

3.      Underfunding

Most businesses fail early on because they simply run out of cash. This is usually because either not enough thought has gone into the real costs of starting up, including a contingency for unexpected costs, being too optimistic about either the level of sales or expecting sales to pick up too quickly. Again planning is the issue; to anticipate these but also to help negotiate back up funding.

4.      Making it up as you go along

You're good at what you do so you start a business. You grow and take on other people and things don't quite seem the same because everybody does thing slightly differently. Suddenly you realise that customers dealt with by some of your people are happier than others and those dealt with by others are downright unhappy. If anyone bothered to ask, your customers would say that dealing with you is a bit of a lottery. Sometimes great, sometimes bad. You also notice that the premises look dirty, the windows need cleaning, nobody's had time to empty the bins or bring the books up to date. Everyone thought someone else was doing it.

You put it down to your people not being as good as you and if you weren't there it would all fall apart. Makes you feel good? Needed? Congratulations! You've become a slave your business.

Having clear, written systems and procedures helps to make sure that the basics are done consistently well. It also makes your business much more valuable because the business isn't run from your head. It runs without you always being there. If you daren't take a holiday, you probably need to deal with this.

5.      Lack of real customer focus

This gets at the heart of why businesses are created.  Your business should exist to satisfy the needs of customers.   Without customers it does not stand a chance of succeeding.  This means that your business should be developed with a focus on the needs of your target customers. The important word here is "target". Your business is more attractive to some customers than others. Are these the ones you want? If they are, everything you do needs to appeal to them. If they aren't you need to find out what appeals to the the type of customers you do want. Too many businesses take anything that comes and try to appeal to everybody and end up struggling to market themselves. It's NOT all about price, and yes, you CAN cherry-pick. It's what successful businesses do.

6.     Too much internal focus

This is the flip side to the last point. We've already seen that lack of systems and procedures leads to chaos but these have to serve the customer not just the convenience of the business. How many times have you as a customer come up against a brick wall when someone says "sorry, can't do that - company policy" or "we can't give you a time, it could be any time between 7 am and 7pm". Annoying or what? Those businesses are just putting barriers in the way of doing business. Systems and procedures are vital TO SERVE THE CUSTOMER BETTER.

7.      Not taking advice

It is important to believe in yourself when starting your business, but don't become too self-assured. You'll soon see that you don't have all the answers! Look for professionals such as lawyers or accountants that can help you deal with some of the technical aspects of your business. These people see a lot of businesses succeed and fail. It is also wise to seek out individuals directly involved in your industry who can provide insights into the operation of your business and the demographics of your clientele.

8.      Taking bad advice

Like most accountants, we often have to compete for our clients' attention with "my friend in the pub" (or the golf club). These people seem to effortlessly earn a fortune and never pay any tax at all. Or so they say (in a very loud voice). The truth is that most of it is either untrue, exaggerated for effect or illegal. Take it with a pinch of salt but by all means get advice if you think there is something you are missing. Just don't blindly assume that it's right just because it's what you want to hear.

9.      Chasing new business at the expense of your existing customers

It costs five or six times as much to get a new customer as it does to sell to an existing customer. Yet most businesses spend most of their time looking for new customers. This becomes a vicious circle because your existing customers begin to feel neglected and go elsewhere which means that you spend even more time trying to fill the gap by getting new customers, neglecting your existing customers even more.

10.    Not looking after the finances

Money is the life blood of your business and it's vital that you know exactly what your financial position is all the time. Too many businesses are run by owners who just rely on the bank statements to show them the current position. These businesses nearly always hit trouble, especially when times get tough. Good record keeping doesn't just keep prissy accountants happy. It's a vital part of your management information - your window into your business. Without it you don't have the full picture. Don't do it yourself; get a professional bookkeeper to do it. It's quicker and they will do it better, leaving you to run the business.

Once you've got this information, use it. Don't be shy about chasing customers for payment. They often won't pay until you ask; so ask. Don't be fobbed off with excuses.

Keep a close eye on your situation. Work with your bank. Keep them informed.