Nothing shuts down a small business faster than an unforeseen complication in your game plan. No amount of startup capital will help an entrepreneur overcome a lack of product diversification or ignorance of local laws and regulations. While many potential problems may seem as if common sense will pinpoint startup disasters before they strike, there’s always the looming threat of an incorrect tax form or a lack of proper savings to throw a wrench in nearly any business plan.
Address Why Consumers Should Buy Your Products/Services
Take a moment to ask yourself a basic question: Why should someone buy what you have to offer? For many business owners, the answer will relate to the quality of their product or service. This sort of thought is wise enough and follows the basic principles of product differentiation. When given the choice between many options, the average consumer will gravitate towards whatever option is the best perceived value for money, which is a vital part of vertical differentiation. There’s nothing inherently wrong with aiming to produce a good quality product at an appropriate price point, yet missing out on horizontal differentiation can sink a brand before it launches.
Unlike vertical differentiation, horizontal differentiation focuses on what sets a product apart in ways that are not measures of quality. For example, selling a brown chair isn’t strictly better or worse than a green chair, but there is a significant difference in consumer reaction if that chair happens to be leather. Do your products have strange and unusual styling? Do you combine different traditional cooking styles to make a more interesting fusion? There’s more to a product than how well it is constructed.
Proper Startup Paperwork May Not Be Obvious
There’s no shame in the process of learning what components make up the fine details of running a business you may be unfamiliar with. After all, many of the internal workings of different corporations are kept away from the public eye and require research to grasp properly before investing in a new field. Skipping out on this step and jumping straight into a business opportunity may backfire in a spectacular manner.
Take auto dealerships, for instance. Most business owners will assume they need business insurance to protect themselves from unseen losses and natural disasters, but operating a dealership also requires auto dealer bonds that protect the customer and governing body from potential fraud should a dealer not be following local laws properly.
Cheap Real Estate is Cheap for a Reason
Minimising costs during the initial operating period for a business is a mixed bag that requires a careful balance of factors to keep service quality high without a major capital loss. Real estate makes for one of the most obvious purchases that can be tempting to cut corners on, yet investing in poor real estate locations or taking the wrong route in regards to leasing or buying can cause very serious financial damage. While local markets will almost always require investigation and the help of a qualified agent, taking a bad lease agreement could cost well over double that of outright purchasing an equal property. Bundle that in with a poor locale and your business won’t have a chance.
Credit Does Not Erase Low Revenue
To succeed in business you must operate with the intent and expectation that you will succeed. Unfortunately, it may seem natural to take this concept too far and spread yourself thin while making up for the deficit with massive amounts of credit without proper precautions in place to make up for lower returns than expected. Turning to credit as a method of floating a company for months at a time in hope of pulling out of a nosedive is a problem in and of itself, yet may also point to deeper underlying problems that should have been addressed long ago.
It’s not impossible to pull a company out of debt. Taking various necessary steps requires harder decisions than asking for another line of credit, which is why many businesses struggle to make those hard calls. No one wants to fire an employee to make ends meet, but that’s just how some situations pan out without proper planning.
Remember that there is no harm in seeking information about your future or current business in hopes of improving your understanding of the market you work within. Address problems before they become a full-on crisis and your business’s growth will thank you.Opinions expressed here by Contributors are their own.