A positive mental attitude is crucial for entrepreneurial success. But optimism alone won’t ensure your new business stays afloat — according to a study by InsuranceQuotes, 20 per cent of US small businesses fail by the end of their first year and 50 per cent by their fifth.
There are various reasons for shutting shop and success rates are higher in some sectors than others.
But some basic principles apply to companies in most countries — if you want to get set for success, here are three expensive pitfalls a startup should swerve.
- Being offline
UK Federation of Small Businesses 2017 stats show that small enterprises accounted for 99.3 per cent of all British businesses and had a combined annual turnover of £1.9 trillion.
Yet in the same period, YouGov revealed that one in five UK SMEs admitted having no online presence, costing a collective £20.2 billion in lost revenue — an average of £20,000 per company.
If you’re launching a new business, don’t miss out on a potential online gold mine — register with Google My Business for a free basic listing on Google Search and Maps, then talk to a reputable agency about designing a website and engaging customers through social media.
The profit potential of a digital presence is significant for SMEs — especially with so many customers searching via mobile for the best local firms.
- Hiring the wrong staff
When you start a company with a small number of talented employees, it can be tempting to promote top performers to management positions once you expand.
But beware you don’t fall foul of the Peter Principle — developed by sociologist Dr Laurence J Peter, this theory proposes that top-down organisations tend to internally promote specialists to leadership positions based on their competence in current positions, rather than their suitability as leaders.
Repeated across an organisation, this phenomenon leads to an entire executive level without the requisite leadership skills — a recipe for eventual disaster.
Leadership gurus like Steve Goldstein believe emotional intelligence (EI) is a better predictor of effective leadership than IQ — insist your potential managers take a Harvard University-recommended EI test to ensure their soft skills are suitable for the job.
- HR errors
HR managers are expensive — currently earning an average annual salary of £46,520 according to recruitment site Glassdoor.
But if you attempt to cut corners on vital tasks like timekeeping, payroll and pension provision, errors and oversights cause staff dissatisfaction and might land you in trouble with tax authorities.
And this situation’s compounded if you employ staff members in different nations and jurisdictions, so it’s unwise to cut corners.
If you don’t have the funds to hire an in-house HR team but need peace of mind, find a global payroll provider offering outsourced services — they’ll automate payments worldwide and ensure compliance in every operational territory.
Swerve these three expensive pitfalls and your new business will spring confidently into a successful future — there’s no time better than the present to get started.
Which pitfalls should a small business avoid? Share your tips in the comments section.
