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According to the US Bureau of Labor Statistics, 20% of new businesses fail within the first two years, and almost half of them do not make it past their fifth year. Being aware of some of the common mistakes entrepreneurs make in their first years of running a new business can not only increase your chances of success but also save you time and money. Below are some top tips for new business owners that will help you avoid the pitfalls of starting a new business.

Ignoring Technology

In today’s digital age, any successful business owner needs to take advantage of technology with regards to matters such as marketing, customer communications, supply chain management and social media. There are many logistics to running a new business that can be improved and streamlined with the help of technology. Making use of intelligent software tools can enhance your business’ efficiency, productivity and ultimately its profitability while a lack of investment in such tools can cause your business to lag behind its competitors. Whether it is virtual accounting and bookkeeping software or online tools that allow you to automate your payment transactions, utilising technology can help your business processes run smoothly and quickly. Knowing how to choose the right software for your business will require a little research but some of the common software tools include:

No Business Plan

Putting together a business plan that clearly defines your business objectives can help you stay consistent in your efforts, improve your decision-making, and serve as a benchmark against which to measure your progress. Without a strategy in place, it can be difficult to identify how well your business is performing and to determine which areas you need to focus on or improve.

Investors or lenders often require a business plan before they will fund a business, so it is advisable to have such a document readily available that communicates your business vision as well as details the fundamentals of your financial forecasting and profitability.

Some of the main components of a business plan include a budget, financial plan, marketing strategy and analysis, sales forecast and key performance indicators (KPIs) which show whether your business is on track to meet its goals.

Inadequate Market Research

Before launching your service or product it is essential to take time to understand your market by conducting research. Knowing who your prospective customers are will allow you to direct your marketing efforts to the correct target audience and will make more efficient use of your marketing budget as well as increase the chances of your product or service being purchased.

To stay current, it is important to continually get feedback from your current and prospective customers base and not just when you are launching. With these three steps under your belt, you are sure to give your business the greatest chance of success.

Whatever your reason for starting a business may be, one thing is certain, you'll need to have a well-thought-out plan before opening your doors for business. It goes without saying, you'll need financial resources capital to build this vision of yours into a reality. You know what they say about all great plans having solid foundations. And that costs money! So how much money will you need? The following 6 tips on how to plan your budget will help you figure that out.

1. Know Your Business Needs

Before you can determine how much money you need to start your business, you'll first need to know what it is that your business does and the products or services it will offer. Knowing how much money you're going to invest in the company and overhead costs such as payroll, taxes, the cost of getting a registered office address for a limited company in the UK or other locations, rent, utilities, and other expenses is vital for planning a budget. To do this, you must know how to calculate your fixed costs and your overhead costs. 

Fixed costs are those expenses that don't change regardless of how much or how little business you have. Think rent, utilities, etc. To determine your fixed cost per month for one year, multiply the yearly amount by 12/52 (there are 52 weeks in a year) = monthly fixed cost before adding on any other overhead costs.

Now add your overhead costs to your monthly fixed cost: advertising, marketing, phone bills, insurance premiums, and any other expenses that vary from month to month. Subtract this amount from the gross income you expect to generate each month after expenses. The resulting figure is your net profit per month. Here's an example:

2. Determine The Number Of Months You Will Need to Break Even

To determine the number of months it will take you to break even on your investment, divide the total cost needed to start your business by your projected monthly net income after overhead costs are paid. This is how many months it would take you to pay off all opening expenses if no new business came in during this time. Let's use the example above for this calculation: 

3. Determine The Additional Cash You Will Need to Keep Your Business Afloat

Let's face it, there are times when our business doesn't generate enough revenue to cover expenses during that period. Perhaps you've hired staff only to realise it would be difficult for them to find clients right away, or you thought your marketing campaign would attract more customers than it did. So now you're stuck with overhead costs but no income coming in. This is where your contingency fund comes into play - another very important part of your start-up plan. To determine the amount of money needed as a contingency fund, take what you currently have plus any additional cash needed until your business can stand on its own two feet without needing a subsidy from your personal account. Here's an example:

4. Use An App

If you're a bit of a techno-geek, then why not try an app to help calculate your budget? There are many to choose from. When choosing an app to help with your budget, consider the following factors:

5. Get Professional Help

Perhaps the best way to determine your budget for starting a business is by getting some professional help. There are plenty of business advisors who can come up with an accurate projection based on their own experience and advice tailored specifically to your business needs. How much this service will cost depends on the complexity of your business (and how much guidance you need) but it's worth considering, especially if you're venturing into uncharted territory or if you don't know where to begin.

When choosing a professional to help with your budget, consider the following factors:

6. Be Realistic About Your Startup Budget Plan

Many hopeful entrepreneurs make the mistake of planning big-dreaming big, hoping for big profits and cash flow, only to become disappointed when things don't turn out as planned. You can avoid this by keeping your budget realistic and making sure the numbers add up. To illustrate the importance of planning your budget realistically, consider this example:

Let's say your budget calls for $8,000/mo in sales and you want to bring in $8,000/mo before taxes. You anticipate needing $2,500/mo for rent and utilities because you plan on having 5 full-time employees. Here's what will happen if things don't go as expected:

Person counting moneyWhen deciding on a budget, consider what needs to happen in order to reach that goal - and then plan accordingly. The key is not to be afraid of making mistakes along the way as long as you learn from them and adjust accordingly. The first step is always the hardest but once you're there, it's only a matter of doing it over and over again until you get it right.

 

1. Realise The Pros

If you feel like starting a business without investors is a nightmare, then a change of perspective will come in handy. Let’s consider the opportunities that open up. You won’t need to negotiate on the steps taken with anyone else. You won’t be dependent on other people’s decisions. In addition, organisational matters and agreements will be to a minimum. Also, you won’t risk your freedom and worry about recouping costs and returning the money with interest.

2. Set Up A Clear Goal

First, we recommend that you carefully research the options that guarantee you a quicker path to earnings and the least risk. Second, according to many career experts, a business without investment is an opportunity to try your hand at something new. Most importantly, you will realise if you have any entrepreneur potential at all.

Many begin thinking of starting a business while still at college. Youthful high spirits, enthusiasm, and numerous plans - all this helps students realise their wildest dreams. At the same time, there are a lot of things that can slow you down, namely lack of time and energy, fatigue, and overall stress. And given the huge amount of homework, the young entrepreneur hardly has any resources left. 

Fortunately, there is a way to unload the schedule and find time for your goals. Outsourcing saves the day: by turning to someone to write a paper for me, students avoid burnout and anxiety. And while professional writers work on your assignments, you can devote yourself to more important tasks - for example, researching the market or finding your first customers.

3. Start Small

Determination and ambition have always been valued, but be careful when it comes to business. Think about the risks and losses. If some of your friends and acquaintances run their companies, contact them and ask them for advice. Perhaps, they will tell you about the pitfalls or offer some help on your path.

Of course, no business person builds a corporation in one day. Numerous success stories teach us one thing: everyone started out small and with no money at all in many cases. The main thing is to assess your capabilities appropriately and understand what you can offer the world.

4. Choose The Niche You Are Good At

Do you have a hobby that you enjoy or a job in which you are a great professional? Think about how to turn the area you are familiar with into a source of income. This is a very important step, as your additional knowledge will become a huge plus in the market.

5. Get A Grant 

This is a perfect way to get start-up capital. First, you come up with a specific business plan for the project that you want to launch. Then, collect all the necessary documents and send them to the grant issuing committee for consideration. It’s simple - if they approve your business plan, you will receive funds to develop your idea.

Note that only those who offer realistic business plans can rely on this strategy. Moreover, we also want to provide you with four great plans that don’t require you to spend any money on your company.

6. Try Your Hand At The Service Industry

To tell the long story short, opening a company in such a sphere looks like this.

  1. You do something much better than others.
  2. You begin delivering your services and earn your first capital.
  3. You expand your business or open another one with the money earned.

In most cases, a business without an investor can be built on services only. This is logical as, with goods, the situation is more complicated. They have to be bought, which is an investment.

7. Sell Goods Being An Intermediary

How does this strategy look?

  1. You are good at sales.
  2. You know where to find lower prices.
  3. You have a client for a higher price, and the price difference is yours.
  4. With the money earned, you can purchase goods, if necessary.

This option is senseless unless you are a really talented seller; otherwise, there is a great risk of not finding clients. Get ready for competition and long hours searching for bargain prices.

8. Sell Information

  1. You master deep and unique knowledge that is useful to many. It will be a plus if you have a brilliant reputation and a strong personal brand.
  2. You actively declare your expertise and sell it to others.

It is necessary that your knowledge is handy: perhaps, you have developed a unique methodology or a special course. 

9. Become A Partner To Your Employer

  1. Let’s say you’re an employee of a particular company and have amazing skills that can save money on something, increase organisational growth, etc.
  2. You offer your services to the CEO (this time, it’s for free).
  3. If they are pleased with the outcome, then you can discuss a partnership.

This strategy is rarely talked about, but surely there are small businesses that started like this. Maybe you know how to boost the sales of services or goods? Then, why not offer the CEO to pay you a percentage of the clients you got or simply buy them from you?

To Sum It Up

You may have noticed that all of these five options (from applying for a grant to being a partner to an employer) have something in common - you must be able to do something better than others. A business without an investor is real - the main thing is to carefully analyse all the risks before taking action.

About Finance Monthly

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Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
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