Preventing failure
A well-managed business can usually withstand most external
and internal problems. You should include planning, target
setting and performance monitoring from the outset, and adapt
your management style as your business grows and develops.
Before starting up you should consider all the risks. Are
the potential rewards great enough? Some of the risks of setting
up in business relate to external factors, such as:
- Financial risks such as running out of money.
- Unstable markets.
- Changing legislation and red tape.
Talking regularly with an experienced business adviser before
going into business can help identify potential risks and problems
before they occur. Everyone affected by the decision to start
a business should know exactly what will be required of them
and what they might get out of it - this includes discussions
with members of your family.
Market research
Gaining credibility with a bank or investor for your new business
venture can be difficult, and market research is an important
way of doing this. Your research should look at the market
you plan to sell your product or services into, and explain
why there is an opportunity for you to sell to that market.
Once your business is running, sales are driven by successful
marketing to a targeted group of customers. If your potential
market is not correctly identified and adequately researched,
this marketing will not be effective.
A comprehensive business plan
Your business plan provides details about your business idea,
finance available, finance required, and potential return on
investment. The plan should draw heavily on market research
and the marketing plans you have drawn up. Your business plan
shows potential investors the viability of your business but
also provides a 'road map' for you to follow, so you can monitor
performance against set targets.
Training
Training can really increase the survival chances of a small
business. Many small business owners know their product extremely
well, but in many cases, they don't know how to manage a business
effectively. Adequate training for owners, covering management,
marketing and personnel skills can cut out many of the problems
of poor management faced by small firms. Training your staff
increases their loyalty to your business while improving their
capabilities. Training also keeps employees up to date with
new developments and helps them to deal with changes in the
business.
Managing the finances
To reduce cash flow problems, your business needs sufficient
capital and back up resources to keep it financially stable.
Very tight credit control is also important. This means keeping
accurate and up-to-date accounts so that you can make financial
decisions quickly. Training in financial skills is readily
available from your local chamber of commerce, enterprise agency
or business support organisation.
Facing business failure
The threat of business failure can be extremely traumatic.
To manage this situation effectively, you should identify and
tackle problems immediately, or contact a business/financial
adviser.
In many cases, a solution will be available, particularly
in financial terms. Where banks are involved, they will usually
try to protect their investment. It is important to maintain
a positive attitude - and to remember that business failure
does not signal a personal failure.
Tips
- Seek advice wherever possible. Many sources are free
to small businesses - contact your local enterprise agency
to find out what free advice is available in your area.
- Take action as soon as you suspect there is a problem
- don't wait until it is too late.
- Before entering into a business, discuss possible problems
and develop long-term strategies to deal with them.
- In order to reduce personal financial risks, be sensible
and maintain an alternative source of income while
establishing the business.
- To reduce potential problems, appoint an assistant. Make
sure they understand your business plan and the strategy
to be used in the event you are unavailable.
- Be aware of, and monitor, potential risks and problem
areas.
- Stay in touch with your target market and adapt to changing
market requirements.
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