Top Tips to Stave Off Startup Failures

If you feel uneasy about starting up your own business, you’re not alone. It’s old news now that many promising companies pop up everyday, then disappear without a trace. Many never had a chance to gain traction.

They made common mistakes. They never developed a good marketing campaign, hired inexperienced sales people, ran out of capital, or mismanaged their money.

How can you prepare your startup to have a greater chance of success? Here are some top tips to avoid becoming another statistical casualty:

Tip # 1: Use factoring to avoid negative cash flow.

If you’re in an industry where it is common practice to offer clients credit, you risk having negative cash flow. This is a situation where you have more money going out than coming in. Although the money coming in may be a larger amount than the money going out, timing is important. If the money goes out before it comes in, you could be courting fiscal disaster.

Although you’ve done the work, you may have to wait to be paid because your clients have a 30 or 60 day credit. Unfortunately, if you don’t have enough reserve capital to pay your overheads, you won’t be able to stay in business long. A much better solution to getting a loan is factoring. Capital funding by TBS, a company that buys invoices, can give you an advance to easily overcome negative cash flow.

Tip # 2: Stick to your game plan

Stick to your original idea and don’t be an opportunist. An opportunist seizes an opportunity when it comes up. While this may appear to be a good thing, it has a serious downside. Chasing too many shiny objects invites distraction. With too many projects in the pipeline, you may not finish any of them.

It’s much better to be strategic. This means that you have a template against which you measure the value of your opportunity. Even if an opportunity looks good, you’ll pass it up if it doesn’t fit into your scheme of things. For instance, if you’re running a freight trucking business and someone suggests reinvesting some of your profits into starting a courier service because of a huge market demand in your local area for package delivery, you will pass it up. While both businesses use trucks to deliver things, it is a completely different business model.

Tip #3: Protect your business finances.

Your business finances are at risk from little known perils. You have to protect your business from data breaches, fraud, and con artists. It’s a sad fact of life that the more money you make, the more people want to get their hands on it. You also have to protect your finances by getting sufficient insurance and by avoiding bookkeeping errors.

Tip #4: Calmly think through unexpected problems.

Problems are part of business life. Unexpected things can completely throw you for a loop. You might invest in products that are recalled by the manufacturer. Your delivery driver might run over someone resulting in a court case. A trusted employee may be embezzling funds. A rival company might spread malicious rumors about your company resulting in a huge loss in revenue. All sorts of unexpected problems arise.

Since they can’t be anticipated, they can’t be avoided. However, you can determine before anything goes wrong that you will not panic and quit your business. Instead, you will remain calm and think through problems. In fact, you should develop a think tank of trusted associates or business problems to work through all your business problems.

Tip # 5: Develop social capital.

Social capital is your network of friends, colleagues, and business organizations that can help you grow your business. While you can go to a bank to raise financial capital, you can only raise social capital in an organic way.

Instead of spending all your time in your business, you should find time to join groups and associations that can help you. You never know who you will meet. You can also give public service talks to build up community interest in your business. For instance, if you run an accounting firm, you can give free talks at your local rotary club on how to manage personal finances.

Create A Compelling Vision

A vision is an invisible force that organizes all your business experiences. Here is how Kurt Theobald, co-founder and CEO of Classy Llama elegantly expressed the power of developing a deep purpose for a business: “I believe the most successful entrepreneurs have a deeper why. They have a deeper purpose for what they’re doing. The most contemporary and best example I can think of is Steve Jobs who came back (to Apple) with no ownership and taking only a dollar for his salary. Just because he cared about delivering greatness. He just wanted to be insanely great and make a dent in the world. That mentality is what changed things for me. It’s the key difference between exceptionally successful entrepreneurs and marginally successful entrepreneurs.”

Although starting your own business can be scary, it’s probably more rewarding than anything else you can do to pay the bills. Working as an employee may be safer, but it’s rare to find an employer who will encourage your innovative spirit to soar. Besides wouldn’t you rather build your own dream? 

About the author

Amanda Green is a site contributor that often writes on personal finance, marketing and business. In her free time she enjoys reading and playing volleyball with family and friends. Her work may also be found on http://www.paidtwice.com

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