Business development 16 January 2017

The five biggest startup pitfalls founders make in year one

startup founder
In 2016, 15 per cent of the UK workforce were self-employed
Writing for Business Advice, redundancy and recovery expert Gary Addison explains some common startup pitfalls and how founders can safeguard against the risk of business failure in the very first months of operating.

According to the Office for National Statistics (ONS), 4.76m people were self-employed between May and July 2016. This equates to 15 per cent of the working population, and illustrates just how tempting it is to be your own boss, creating an enterprise that sustains you financially in the long-term.

Although some people set up their business using a just do it? approach, a little planning and preparation go a long way to mitigating the risks of self-employment. So what are some of the ‘startup pitfalls you might experience during the first year in business?

Squandering your business capital

it’s very tempting to buy or rent items that convey a certain image expensive technology, a trendy office, all the bells and whistles but your business won’t be sustainable if you spend money on non-essentials at this stage.

During the first year you’re laying the foundations for a viable long-term future, and should focus on what’s needed today to deliver your service or product – anything more than this compromises your efforts, and threatens to destabilise the entire enterprise before you’ve even found your feet.

(2) The temptation to overtrade

Taking on a new contract without being properly equipped to fulfil it can mean the end for any business, but the fact that you’re also in year one means youll have limited access to funding.

it’s easy to assume you’re heading for success when terms are agreed with a high-profile customer, but resources could be stretched to breaking point in an effort to meet their requirements.

Planned, steady growth is a more reliable base on which to build your business, and when you’re ready youll be able to take on larger contracts with more confidence.

Failing to pay the bills on time

Gaining control over cash flow is one of the biggest challenges during the first year, but it’s vital that your creditors are paid on time. Not only will you develop a good reputation in the industry, you could gain access to extra credit from suppliers.

The threat of legal action for non-payment can come only too quickly for businesses struggling with cash flow, especially if the creditor is HMRC. They have additional powers to recover debt, and are known to take action promptly.

If you know where the money is going, when more funding will be needed, and constantly strive to minimise your outgoings, youll stand the best chance of success.

(4)falling behind with the bookkeeping