If you’re considering setting up your first business, you should know that it’ll be one of the most thrilling, rewarding, and terrifying things you’ll ever do. But anything worth pursuing is bound to be a challenge. If you have a good idea that you believe in, then the first (and arguably the most difficult) step is behind you. After that, the possibilities might seem endless; the newfound freedom of being your own boss, the excitement that comes with your first hires, and who knows…perhaps a period of intense growth could be on the horizon.
But in reality, things won’t always work out as intended. With each aspect of running your business comes a steep learning curve, and altogether, the amount of learning on the job can be enough to shake even the most motivated entrepreneurs. This doesn’t guarantee that you’re dead set on a path to disaster by any means, but it can be exhausting. The silver lining here is that so many first-time business owners fall into the same traps, so we’ve put together a guide to help you identify these challenges before they can trip you up.
The Business Plan Needs a Redraft
It’s a difficult thing to get right the first time. If you don’t have any experience doing something, you’re up against it, let alone when writing your first business plan. It’s a daunting prospect, and many first-time entrepreneurs approach it with the very best intentions.
So what goes wrong? Most owners approach this task with the intention of creating something to present to investors or a bank, so it’s often crammed with performative jargon and ludicrously optimistic projections, all while overlooking some critical areas in dire need of development.
A business plan can be improved with a simple shift in perspective. You aren’t writing it to market yourself to investors, you’re writing it to give yourself a strategy that encompasses your goals, strengths and weaknesses, and forecasts informed by research-backed data.
Blueprinting your business properly can also reveal easier, more affordable ways to operate your business that you hadn’t previously considered. For example, if you were starting your own construction firm, in your initial outline, you might have initially put a large portion of your budget aside to purchase the equipment you’ll need on-site. But upon taking a closer look at your cash flow in those early months, you could see that it’s much more cost-effective to use an equipment rental or plant hire company at first, before investing in your own machinery in the long term when your business grows and stabilizes.
When writing your business plan, start by detailing your product or service, the problems it solves, and why it is the best product/service to solve those problems. Next, identify your target demographic (perhaps using buyer personas) and marketing strategy to best attract those customers before laying out your budget, pricing model, and projected revenue and costs.
Not Focusing Enough on the Customer
It’s easy for lots of entrepreneurs to find themselves swept up in the more creative aspects of their business. Things like brand identity and website design are often on the receiving end of hundreds of hours of fine-tuning, while the customer can end up becoming something of an afterthought.
While the creative explosion at the beginning of your entrepreneurial journey can be exhilarating and the results are important, they pale in comparison to the customer experience. Because, when it comes down to it, the function of a business is to solve a real problem for a real person. When business owners get stuck in the weeds of logos and colour schemes, they’re neglecting the needs of their customers
So how can we confront this common obstacle? Instead of perfecting superficial details, hone in on customer interaction and feedback. Ask your target demographic about their needs and frustrations, create feedback channels for existing customers to tell you about their experience with your product or service, and be open to any recommendations. Update your product or service in prototype form and test with a sample of customers, before receiving more feedback and refining.
Your goal early on isn’t just to look like an established, polished business; it’s to be one that genuinely helps your customers. The finer details can evolve with you.
Financial Inexperience and Pressure
Your business isn’t a charity. You could have the happiest customers in the world, the most viral marketing campaign and the best product since the first time a knife glided through bread. But if your finances aren’t up to scratch and your cash flow is negative, your business isn’t long for this world. The commercial aspects of running a business can be intimidating to newcomers, and, to an extent, they should be. Finances are the backbone of every business; if entrepreneurs are unable to control operating costs, despite revenues, then that’s it. Game over.
But just because finances are imposing, it doesn’t mean they’re overcomplicated. Entrepreneurs don’t need to be finance experts when they’re setting up their first business, but they do need to learn the fundamentals.
Revenue
The total amount of money coming in.
Expenses
The total amount of money going out.
Profit
The total amount of money remaining once all expenses are subtracted from revenue.
Cash Flow
The money coming in and going out of the business at any one time. Strongly linked to timing, for example, if you’re relying on invoices that’ll be paid two months later, but you’re still paying bills monthly, you’re in trouble.
Margins
The difference between your pricing and the costs necessary to produce or deliver your product or service. Even if your sales figures are high, low margins can become a drain on profits.
What’s more, if you feel that the financial aspects of your business are taking up too much bandwidth, seek support from an accountant who can set up proper accounting systems, double-check that you’re complying with tax laws, and identify potential threats before they arise.
In Conclusion
You’d be hard-pressed to find anyone who claims that running your own business—no matter the scale—is an easy endeavor. It’s tough. Especially for first-time owners just starting, who are often saddled with more debt and risk before they can even get the ball rolling. But don’t overcomplicate matters. Offer yourself the luxury of having a solid business plan that you can always come back to. Familiarize yourself with the finance fundamentals and stay on top of your revenue, expenses, and pricing—get as much juice as you can from the squeeze. Finally, never forget your customers’ needs. Open clear channels of communication to let them help you.