Starting a business isn't a question of improvisation. To start with, you need to have an idea and then know how to put it in place step by step... If not, your business probably won't last very long! To help you, I wanted to share 4 mistakes you should avoid at all costs when starting your business!
Article by Guillaume Le Brouster, founder of The Business Plan Shop
The first 2 mistakes usually take place during the preparation phase and are obstacles that I, and project directors who use The Business Plan Shop to create their business plan, are faced with on a daily basis. The last 2 mistakes concern the running of a business once it has been launched, and are mistakes that I, too, committed in the early days.
Mistake 1: Carrying out your market study on the internet alone
I'm sure you know the expression "don't put the cart before the horse". This is very appropriate when creating a business.
The survival rate over 5 years for businesses is around 50%
according to INSEE. The survival rate of startups is estimated at somewhere between 15% and 20%
. Your chances of succeeding are therefore, unfortunately, quite low...
There are many reasons why the idea for starting a business can be unsuccessful. There is, however, a factor that you have control over, which can help you to significantly increase your chances of success: the market study
When it's carried out properly, i.e. out in the field meeting potential clients and other players in the same sector (competition, suppliers, etc.), the market study allows you to considerably "de-risk" your project
by analysing the market for your products and services beforehand.
However, all too often, beginner entrepreneurs think it's enough to carry out their market study on the internet. Big mistake!
It's true that we can learn a lot of interesting things on the INSEE website or by carrying out a long distance survey, but it can't beat what you can learn by sitting down and drinking a coffee with your future competition,
or talking face to face with someone who seems interested in your products or services.
Mistake 2: estimate your break-even point in units, not turnover
You don't necessarily need to be an expert in accountancy to be able to start a business, far from it. On the other hand, there is a figure that you should make sure to estimate when you are making your first business plan: your break-even point, in units
The break-even point is simply the number of sales or clients necessary in order to be profitable
Why is it important? Put simply, calculating the break-even point in units rather than turnover will allow you to know straightaway if your business plan is attainable or not
Let's take an example... Imagine you want to open a restaurant and you estimate that your break-even point is £365k, and the average bill is £15 / person.
Alone, these figures don't say much.
Let's calculate you break-even point in customers per day: £365k / 365 days / £15 per person = 67 customers per day.
This figure immediately becomes more usable
Before even launching, you can compare it to the number of tables you have in your restaurant and estimate the fill rate needed to be profitable. If it's too high it's not worth starting
Next, you can use this figure to re-evaluate your chances of success based on the last month of activity: if, after 6 months of activity, you only have 15 customers a day, it would undoubtedly be better to stop straightaway rather than lose 2 years on a business that will probably never be profitable
. On the other hand, if you have around 60 customers per day you have good chances of having a profitable
Mistake 3: wanting to do everything by yourself
These are always a lot of things to do when you run a business. A study carried out in 2014 by American Express at Ipsos
estimated that small business owners need 3 hours and 18 minutes more per day on average
If you want to grow quickly, there's only one secret: you must free yourself from low-value tasks in order to devote yourself fully to the development of the business. It's impossible to do everything on your own: outsource
What and when to outsource? That depends on the type of business you're creating.
Personally, I use the following formula: a task should be outsourced when it's not at the heart of the business and the cost of outsourcing is 2 x inferior to the internal cost
The internal cost simply represents the salary of the person carrying out the task internally, multiplied by the time it would take them.
A typical example of a task which should be outsourced is researching documentation online or reservations for a business trip. For these kinds of tasks, you can easily find a freelancer on Upwork who would be delighted to take care of it for less than 2$/h.
Mistake 4: underestimating the amount of time required for administration
The last mistake to avoid that I would like to share with you today is a (very) big classic.
You have prepared your plan of action for the week ahead you say to yourself: "Okay, this week we're going to do A,B and C"... then the end of the week comes around and you have just about completed A.
Why? It's very simple: one of your clients needed a retouch on a project you thought was finished, your accountant needed you to send over documents that you couldn't find anywhere, you needed to re-contact a few clients who were a bit behind on their payments, etc.
Okay, I'm exaggerating a little. But it's a well-known fact that things never go quite as expected in the world of entrepreneurship
It's all part of the game and you must anticipate
, without being too aggressive, your plan of action: set aside time
, otherwise you risk finding yourself at the end of the year with a serious gap between your objectives you expected and what you actually managed to achieve.
There you go, that's all for this time, I hope you found this advice useful and if you have any questions or you have committed the same mistakes in the past and feel like sharing, don't hesitate to let me know in the comments section!