— October 8, 2018
It’s no news to any entrepreneur that the first year of business is a tough one. Navigating the ups and downs of being a business owner can be difficult but also incredibly rewarding. With the 5.7 million SMEs that exist in the UK, almost all of them have run into similar issues within their first year of business. The good news is that 5.7 million SMEs have worked through these issues, with many turning into seriously successful organisations. We’re here to explain the most common issues start-ups will run into in their first year of business, and how to best prepare for meeting them head-on.
No Business Plan
With a lack of experience and understanding, first-time entrepreneurs can often find themselves up and running without a proper business plan. This can lead to a lack of direction in the business, resulting in poor decisions and bad communication. You may have all the ideas in the world but you still need a formal document that will become the foundation of your business.
A carefully constructed business plan will help you test your initial idea in the market and as a result, can save you time and money. It also allows you to solve your future problems in advance by planning out the details of your business over time. If things should go wrong, your business plan will offer you guidance in helping to work issues out and keep working towards your ultimate goals.
Trying to take on too much
Owning a business is stressful and no one is good at everything. It’s difficult in the first year when money is tight and you have to do most of the work alone, but try to avoid burning yourself out.
Hiring staff is an option but if this isn’t feasible then having an advisor will definitely help with trying to take the load off when the stress starts to mount. Be realistic about the work that you will take on in your first year; you might be keen to take on as much work as possible to keep the invoices coming in but you must be realistic at what is physically possible. It’s easy to get carried away with ideas as a new business owner but remember it is more important to do one thing extremely well than it is to try to do everything.
An organisation is nothing without its employees and if you’re lucky enough to be in a good position in your first year to hire, you must also manage them correctly.
Taking on too much work also applies to your employees. It is a common misconception with small businesses that because of the size of the company, employees have to ‘give 110%’. This can result in employees being placed under too much pressure to do multiple jobs but only receiving one wage leading to a poor workplace mentality and high staff turnover. Be honest with who you hire from the get-go, make sure they are fully aware that because of the size of the business, extra work will be likely but they will be rewarded as a result of it.
It is also important to make sure that your employees have clear boundary lines. Set them objectives and targets like you have in your business plan, make sure they’re accountable for any shortcomings and rewarded for any time they go over and beyond. After all, if they’re helping you succeed as a business owner, they deserve to share in some of that success too.
The most common fatal mistake for small businesses in their first year is running into financial problems. New business owners often have a lack of understanding about business financing or underestimate how much money they require at the start-up stage, which can have businesses failing before they’ve even begun.
Use your business plan to ascertain how much money you will need for your first year of business; weigh up your costs and realistically forecast your income so you know how much you will need to succeed.
One of the common issues businesses can run into in the first year is with cash flow. Lack of experience in managing this and delays in payment of invoices from clients can be disastrous for a start-up. It’s always best to look into business financing while compiling your business plan, so you can be prepared should the need ever arise.
Understanding legalities of owning a business
Getting your head around the legalities of being a small business owner can be complicated but when you consider the consequences, is well worth your time.
Knowing and understanding advertising laws when conducting any marketing activity is imperative. You must be truthful and not misleading with your campaign, and comply with anti-spam laws, and privacy laws concerning storage of customer data.
Intellectual property laws are another common oversight of small businesses. If you are creating a product or service from scratch, you will have to check that your offering is not conflicting with another business’ IP and that you protect your idea effectively. Not abiding by these laws can land you in some trouble with pricey lawsuits as seen in the high profile Cambridge Satchel Company vs Zatchels case.
Finally, your legal responsibility to your employees is very important. You must understand employee rights such as discrimination, harassment and termination. Health and safety laws in the workplace are also important to the wellbeing of your employees and your business. You will be subject to a hefty fine if you do not comply with these standards.