Avoid the pitfalls
If you spend time on planning, and are well prepared, this will increase the chances of successfully establishing your own business. The tips below will help you avoid the classic pitfalls during the start-up and early days of your business.
Estimate what your start-up will require
Do you have the determination and personal qualities you will need before you really get started? What is your capacity for work and what skills do you have as a business manager? Setting up a new business can quickly take up a lot of your time and impact on those closest to you. Most people can cope with this for a while. Consider whether you are willing to sacrifice holidays, free time and time with your family in order to realise your dream. Try to estimate how many hours you will need in order to succeed. You should also prepare those closest to you for what you are about to do.
Do not overestimate your market
Many start-ups assume that the market is bigger than it really is. A good tip is to investigate the market before you really get started. Ask whether the problem your idea is going to solve is also considered a problem by the customers. Be sure to collect relevant market information and make adjustments after input from customers before making important decisions.
Make sure your budget is not overoptimistic
A classic pitfall is creating unrealistic budgets for the start-up phase. Revenues are often overestimated, while expenses are underestimated. If this happens, you may experience problems meeting your financial commitments. Make sure you include all possible costs when you prepare the first budgets for the start-up phase and at least during the first year of operations.
Choose an appropriate organisational form
Choose a legal strukture that is appropriate for the risks that you will take on and the scope of what you will start with. For example, it may be a good idea to set up a private limited company instead of a sole proprietorship if you are taking a big financial risk.
Check all the formalities
Familiarise yourself with the requirements set for your business and what and to whom you have to report. You may run into trouble if you fail to meet the deadlines for submitting reports. For example, you will be charged a fee if reporting and submission are delayed. Remember that you will have to submit reports even if your business is dormant.
Sound financial management is key
Send invoices to customers as soon as you have completed the assignment or sale. It is important that you receive the money quickly. This is an important factor as regards liquidity and your ability to pay the company's bills on time. In the case of major assignments, you could agree to part-invoicing during the assignment period. Enter into written agreements with your customers which stipulate when invoices will be sent and what should happen if there are changes to the assignment.
Familiarise yourself with the requirements if you intend to do your own bookkeeping. If you do not have sufficient time or the skills needed to prepare accounts yourself, you should ask someone to assist you with this. This will free up time for what you do best and what will generate money. Making mistakes in tax and value added tax calculations can quickly become an expensive business, especially if you later need assistance to rectify the situation.
Good agreements are vital
If you run a business together with other people, it is important that you avoid disagreements over the running and direction of the business. Before starting a business, you should sign an agreement which takes into account "both the good times and the bad".
Make sure you have enough start-up capital
It often takes longer than you think to really get a business up and running. This means it will also take longer before you start generating revenue, while you still need to have enough funds to pay your obligations on time. So, make sure you have enough capital to finance the start-up.