Struggles of a novice entrepreneur

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:

1. Both eBay and Amazon charge monthly fees (as does PayPal, who process our payments)
2. 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)
3. 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.

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Bookkeeping for the small business

One thing every business needs to get the hang of is bookkeeping. For the uninitiated, bookkeeping is basically keeping track of all expenditure and income of your business. If you wish to keep control of your business then you need to be able to do this and so you need some method of recording all those transactions. This is the art of bookkeeping.

Years ago, double-entry bookkeeping was introduced, possibly as early as the 12th Century in the Islamic world. At the time of course, computers didn't exist (unless you believe in Aliens!) and so it was all done in written ledgers. Nowadays, there are hundreds (if not thousands) of software packages that promise to simplify your bookkeeping and believe you me, it needs simplifying!

Now, there are some free (open source) bookkeeping packages but most will cost you anything from a few pounds. However, more important than price is what you require from the software and what features it has. If your business is relatively straightforward (perhaps you are not VAT registered and have few customers but high value sales, or perhaps you are a consultant rather than buying and selling goods) then you won't need a software package that has tons of features and costs a pretty penny. However, if your business has a high volume of transactions involving lots of customers, products and suppliers, and you need to keep track of VAT, then your needs will be more sophisticated.

Another factor to take into account is who will do all the data-entry. Will you be doing it yourself or employing someone else to do it? If doing it yourself and you are not a computer expert, you will want something that is simple to use and hides all the complicated stuff behind the scenes. Chances are that if your needs are complex then you will probably employ someone with the requisite skills and they will be familiar with software packages like SAGE.

Another option for the small business is to go online. Software packages such as Kashflow are an ideal choice for the small business owner who is unfamiliar with bookkeeping software and can't afford to employ anyone to do their bookkeeping for them. Advantages of going online is that your data is available wherever you are as long as you have internet access. This is ideal if you use a laptop for running your business or move around and not always in the same geographical location.

Most online bookkeeping packages come with support and various features such as built-in reports and the ability to submit VAT Returns and the like from within the software. Most are reasonably priced and don't lock you into long contracts. Kashflow for instance has a fixed monthly fee and you can benefit from a free 60-day trial (no credit card details required). It also has a wide selection of reports to print or download.

Now I must declare a personal interest here, in that I am currently using Kashflow to manage my bookkeeping. I settled on Kashflow after trying various ways of managing the transactions  in my business. The problem I had (and am still grappling with to some extent) was that I sell on eBay, Amazon, my own website and to the odd personal customer. The sales on eBay and my own site go through PayPal, and I then manually transfer money from PayPal to my business account. It gets complicated because PayPal and eBay both deduct fees. Also, if I purchase goods I usually pay from my PayPal account which, if there are insufficient funds in my PayPal account, they will also transfer money from my bank account. This makes it difficult to keep track of what money comes from where. As I import goods from abroad and also sell around the E.U. and elsewhere, I have to take account of import duty, VAT and currency conversions.

It was a nightmare trying to do this manually in a spreadsheet, even one put together by my accountant. Even in Kashflow it hasn't been easy but I am on a learning curve and not being an accountant I still find the principles of double-entry bookkeeping hard to get my head around. Kashflow does try it best to make this easier than it would otherwise be and at the moment I feel that over time I will get the hang of things. Support is free and there is a very active forum so there is plenty of help available. The fact that you can pay a bit extra and have Kashflow automatically import your PayPal transactions is what convinced me to go with it. You can also import your bank transactions in .csv format for free.

All in all, you have nothing to lose by taking advantage of the free 60-day trial and there is no need to hand over your credit card or bank details. Whether you stick with it after this period is up to you but you have nothing to lose by giving it a go.