Starting a business can literally change the course of one’s life. However, a few simple mistakes can lead to the downfall of a potentially great business.
Below are 10 mistakes you should avoid when starting a business in Kenya.
- Starting Without a Plan
This is a common mistake that many entrepreneurs make as they are eager to get their businesses up and running. Although making plans on the go may get you somewhere, it is not a great long-term strategy.
It takes a lot of memory power to keep up with all the intricacies of running a successful business. Therefore, failure to prepare a written plan leaves you more susceptible to errors, forgetting, and eventually derailment from your goals.
You should always prepare a plan before starting your business, even if it’s just a page or two. The business plan should indicate the operating costs, anticipated selling price, information about the target market, and other relevant information.
2.Starting with Insufficient Capital
The vast majority of businesses don’t make profits when they first open, sometimes for years. Therefore, you need to ensure you have enough money to cover your living expenses, as well as the business’ expenses in the initial stages. To do this, you will need to conduct a feasibility study.
Some entrepreneurs make the mistake of believing they can accomplish their goals with less than they need. This approach is risky as it leaves no room for unforeseen challenges that may come up along the way.
Starting a business with inadequate funding can lead to stalling, demoralization, and even total failure. Some of the popular options for securing capital are borrowing or applying for a startup grant. Whichever way you do it, getting your finances in order before starting is absolutely key
3.Failing to Register the Business/ File for the Proper Legal Documentation
Some of the most crucial mistakes that entrepreneurs make are failing to pick the right entity, register the business, or protect their intellectual property. Getting the green light from the government is vital as legal problems can bring a great business to an abrupt end.
Other legal documents to take note of are the city council business permit, fire safety permit, and health related permits. It is advisable that you familiarize yourself with the legal procedures before starting your business.
4.Not Making Use of Contracts
Being too trusting is one of the worst mistakes an entrepreneur can make. Even great relationships can come to an abrupt, and bitter, end. Particularly when large sums of money or stakes in a company are involved.
Signing a contract is the best way to deter/settle potential disputes. It is therefore paramount that you, and your partners, sign a well-prepared contract no matter how close you are.
5.Handling Everything Yourself
Being a Jack of all trades definitely has its advantages. However, most successful businesses take advantage of different people’s knowledge and experience.
During the initial stages, you may have no option but to handle everything yourself. But as the business grows, it is advisable that you form a team of people who are good at what they do.
It is also vital that you hire people who are qualified, competent, and committed, rather than just friends and family. Resisting this bias ensures your team is as strong as possible while reducing the chances of disputes on issues involving ownership, decision making, and so on. Furthermore, you may find it difficult to criticize or challenge your relatives and friends.
6.Relying on Your Gut
Another costly mistake that entrepreneurs make is believing they know what the consumer wants, rather than actually finding out. You may think consumers will love your product only to be disappointed after investing heavily in it.
It is therefore important that you conduct sufficient research before getting too invested. This may include running tests to get an idea of how the product/service would do. Furthermore, it is advisable to share the idea with other people, and consider their input or feedback.
Consulting experienced professionals in your field could save you a tremendous amount of time and resources. This is because they may provide you with guidance and information that would have probably taken years to discover on your own.
7.Not Investing in Marketing
Believing that people will automatically come to your product can be a very costly mistake. You may even have a great product or service. However, unless you conduct an effective marketing campaign, people may never even find out about it.
It may be tempting to hold on to the money you would have spent on marketing. This, however, may be the more costly strategy in the long run as it will take your business longer to grow. You would rather spend the money now to solidify your position in the industry faster.
In fact, it is advisable to start your marketing campaign before you even launch the business. You don’t have to wait to open physically to formulate a marketing strategy and start raising awareness.
8.Undervaluing Your Product or Service
Another mistake that entrepreneurs make is pricing their products really cheap, or worse, freely giving them away to gain customers. This strategy may work in some cases, however it needs to be implemented with care as it can backfire, leading to losses.
If you did your homework, you should be able to price your products for what they are worth.
9.Failing to Implement a Proper Bookkeeping Process
Good bookkeeping is a great habit that helps you to track your progress, make better financial decisions, detect the source of problems, and see opportunities early. Starting without a good bookkeeping system increases the risk of errors and can lead to financial issues.
Additionally, maintaining good bookkeeping habits makes it easier to stay on top of important issues such as tax. Getting in trouble with the government can quickly lead to the downfall of your business.
10.Going Down with a Sinking Ship
It’s great to be passionate about your idea. However, there may come a time when the feedback you receive from customers and associates does not align with your original plan. At this point, you will be faced with the decision of whether to make some changes or stick to the plan.
It may be tough to accept that your product or service has serious issues. However, it would save you a lot of time, energy, and resources to be flexible enough to give your customers what they asking for. Even if you’re already heavily invested.
Written by Patrick Kenyi, Editor at Growth Strategies 101