Cash Flow Statement Are Not Obligatory For Small Company In Top Ten Startup Mistakes That Almost Always Lead to Business Failure

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Top Ten Startup Mistakes That Almost Always Lead to Business Failure

Many startup ideas never materialize and many, many fail within the first year or two. In most cases, failure is not related to the business idea, but to how the business side is handled. The business of entrepreneurship is business first, operations second (what your business actually does). The ten most common startup mistakes that lead to ultimate failure are:

1. Insufficient development of start-up ideas: Most startups don’t fail because business idea it’s bad. The problem is that many first-time entrepreneurs actually fail to plan the business before investing money in a startup. No matter how great a business idea is, it cannot succeed without detailed planning. Take the time to process all aspects of your business idea. Not only will you have a better understanding of how far your business can go, you’ll also reduce risk and prepare to make the best decisions as you go.

2. Failure to understand and disregard legal obligations: An incredible number of entrepreneurs leave the legal aspects of setting up a business to someone else or, even worse, ignore them altogether. Eventually, this failure to fulfill your marital obligations will come back to haunt you… and the result can be devastating. Every business owner must understand and obtain all necessary licenses and permits and establish compliance systems for taxes and fees paid to local, state and federal governments.

3. Poor (or no) marketing planning: Marketing is the lifeblood of any business start-up and is more than business cards and an ad in the yellow pages. A significant portion of your time and expense budget should be devoted to marketing. Bad or no marketing equals no sales…equals business failure. Before launching, do your homework to identify your target markets, figure out how best to reach them, and set clear goals and metrics to ensure your marketing efforts pay off.

4. Poor (or no) financial management: Success in business is the bottom line – no profit, no business. Proper bookkeeping is half the battle. Too many new entrepreneurs are willing to hand over the entire responsibility of keeping the books to someone else – a dangerous decision that very often leads to business failure. Reviewing and analyzing financial reports is the other half. It is vital for any business owner to understand what financial reports mean and how a change in one area affects all others. Cash flow issues are also a major financial management problem for many early stage start-ups. Good planning before starting a startup will clarify how much money your business idea will need to succeed. Whether you consider yourself a numbers person or not, as a business owner it is critical that you take responsibility for learning and applying basic financial management skills if you want to succeed.

5. Errors in sales forecasts: Establishing an initial sales forecast can be difficult, but there are procedures you can follow to make it as realistic and accurate as possible. All too often, would-be entrepreneurs plan their sales based on what they would like to sell instead of what they are likely to sell. While optimism is a great entrepreneurial trait, an overly optimistic sales forecast will leave you with serious cash flow problems and even greater problems securing financing.

For example, the business plan we recently reviewed seemed well written and expertly designed. However, the sales forecast reflected sales that required each staff member to spend 19 hours a day, 300 days a year. Another retail company showed average total purchases of $230, even though the average price of their products is only $12. The assumption that each customer will buy an average of 19 items on each visit is unrealistic. Any competent investor will look for these mistakes.

6. Insufficient capitalization: Not starting with enough capital to support a business in its early stages is a common mistake. If you plan your idea thoroughly, you’ll know how much capital you need to cover while you build a customer base, including working capital, to keep you shouldering ramen noodles until your business takes off. Good planning will also increase the chance of getting investors, whether public (banks) or private (family and friends).

7. Poor online presence: An effective online presence is essential for any modern business. Just publishing a website is not enough. In fact, loading a website without marketing is like posting ad copy in your living room alone – if your target market can’t see it, it might as well not exist. Many recent startups have failed and burned because the entrepreneur thought that simply putting a website on the Internet would increase sales. It won’t.

8. Leave critical tasks to the “experts”: Many entrepreneurs believe that a good idea and solid operations are enough to build a successful business, so they choose to outsource key startup tasks like marketing and accounting. For some, business they are simply not interested in business, so they choose not to learn the details of financial and marketing management. Eventually, these decisions backfire. If you don’t know how money works, you can’t make the best decisions for your business. If you are unaware of the results of your marketing efforts, you cannot accurately predict sales and therefore cannot plan for the future. it is yours business, you need to know and understand all aspects from the ground up, or you could be working for someone else.

9. Without ongoing planning and review: As the actual operation of a startup takes up more and more of an entrepreneur’s time, it is very easy to overlook the critical tasks of review and planning. Every aspect of the business should be reviewed from time to time, especially the financial statements and the marketing plan. If you don’t know where you are or where you’ve been, it’s impossible to know where you’re going.

10. Lack of Patience – Cave of Despair: Every startup takes some time between being ready to sell and actually making sales. We call this gap the pit of despair because the entrepreneur wonders if he made the right decisions and if the company will ever work. Many startups get to this point and the entrepreneur quits in frustration. Startups generally don’t succeed overnight. The Pit of Despair should be used to improve internal systems, work with free internet marketing techniques (participating in relevant forums, writing and publishing articles, creating website content) and planning the future of the business. Don’t let the inevitable delay ruin your chances of success – plan, anticipate and use your time wisely.

For the most part, a strong focus on the three keys to startup success (planning, marketing, and financial management) will overcome most of the common reasons for business failure. Pay attention to detail from the start, learn everything you can about running your own business, and don’t let anything stand in the way of building your business into the successful business it can be.

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