Image via WikipediaIts not easy starting your own business, never mind making a success of it. According to a recent BBC news report, four out of every five business start-ups ends in failure and one of the main reasons comes down to either poor planning or a total lack of it.That's quite a startling failure rate! How can one avoid being in that 80% and instead be in the 20% who make it? Certainly, our first year has been a struggle. I am not going to divulge every last detail of the first 12 months of our business, nor will I give details of our financial performance. Rather I want to focus on some general points based on our experience.
First, the biggest problem we have faced has been capital - raising enough of it to invest in the business. We made a conscious decision at the start not to get into debt with the banks. Instead, thanks largely to some friends willingness to invest in our business, we started off with a small amount of capital and have financed the business with that initial investment and two further small injections of capital. All told, we have invested less than £5,000 from friends and our own resources. However, the downside of not going to the banks has been the fact that the initial capital investment has been relatively small. With hindsight, we should have started off with a larger initial investment. This would have helped us invest in marketing and in stock instead of waiting for profits from sales to allow us to buy more stock and market the business.
Another problem has been what is best described as a lack of planning. As te BBC report points out, poor planning is a major factor in a business failing. In all honesty, a lack of planning has been a factor in our struggles. Bearing in mind that when we started out we only knew one thing, that we had a great product and that it had high profit margins. However, what we needed to do was market that product and that is where we had no idea how best to do this. We had no desire to open up a physical store and instead we were going to focus on online sales. The question was, how to go about. Of course, there was eBay, but also Amazon and the option of building our own ecommerce store. In the end we started off with our own store (built using RapidWeaver) and an eBay Store. Later on we added Amazon to our channels. We also tried advertising in a computer magazine, as well as local advertising.
However, we faced several issues:
- Both eBay and Amazon charge monthly fees (as does PayPal, who process our payments)
- We had problems with the shopping cart plugin on our own site (fees were small but the plugin didn't work properly when it came to discount voucher codes - something we needed to work)
- Advertising doesn't come cheap - especially AdWords and the like. We tried Facebook Ads only to find them very expensive and not very effective. This meant we were using most of our profits on advertising, hampering our attempts to introduce new products.
We made a mistake in not sticking with our original product and instead adding new product lines in a mistaken attempt to attract more customers. All it did was reduce our cashflow. We weren't patient enough to wait for the business to grow with just one product. Adding additional products meant that funds were unavailable, being locked up in slow-moving stock.
So, that's just an insight into our tribulations in the first year. Hopefully, it will help soem of you avoid making the same mistakes.
