4 mistakes to avoid when setting up a business

Author
Dominic Claeys-Jackson, Editor
Posted
January, 2017

Going self-employed requires huge commitment and an even bigger leap of faith, but there's plenty of expert advice available to help you make your move

We asked three graduate entrepreneurs what young business people should avoid when starting out...

Disregarding your customer

Making a difference to the lives of others requires you to focus on maximising the quality of your offering rather than its profitability. Dr Akanimo Odon, CEO and principal consultant at EnviroFLY Consulting UK, an initiative that helps international organisations form business partnerships with their African counterparts, warns that failing to provide a great service can be fatal.

This is because self-employed individuals initially lack the reputational leeway afforded to established businesses. 'Always impress your clients with top-quality work,' urges Dr Odon. 'If a poor job is delivered, you alone are to blame.'

Indeed, your start-up's goal should be to fix a problem efficiently and distinctively. Greg Duggan is co-founder of high-protein, sugar-free ice cream company Wheyhey. He began his venture after visiting his business partner's diabetic parents, who wrongly believed that their favourite 'low fat, low calorie' frozen yoghurt was beneficial to their health.

In reality, its high fructose content ensured that it certainly wasn't nutritious - and inspired the development of Greg's alternative. 'Your business must add value to your customer's life,' he emphasises.

Lacking passion

Self-employment requires an incredible amount of hard work. If you don't love what you do, you'll regret spending so much time on it, and probably won't have the willpower to overcome the countless obstacles you'll face during your business's infancy.

Anna Gray is owner of Model Students, a professional modelling agency that finds students part-time, flexible work in their local area - and therefore solved a problem close to her heart. She was inspired to start her business after struggling to balance her full-time undergraduate degree at The University of Nottingham with long-distance modelling work.

Capitalising on this opportunity involved Anna burdening the stress and financial challenges of self-employment, while many of her friends enjoyed well-paid graduate jobs. Yet nearly seven years on, the success of Model Students has ensured that Anna has no regrets. 'Self-employment is really exciting, and looking back at what I've achieved is amazing,' she says. 'What's more, I'm doing something that I love and find fun.'

Failing to understand your industry

Unless you fancy wasting both your time and money, possessing strong knowledge of your industry is imperative.

Greg and Anna both formed businesses in industries they knew well. Dr Odon, meanwhile, established EnviroFLY after recognising that the African market's 'peculiar' business culture was deterring potential collaborators from abroad - despite the continent's obvious economic potential.

'Having spent a long time before and during my postgraduate studies at Lancaster University developing extensive links and networks in numerous key industries, it made sense to set up a company that helps global clients to enter and grow in the African market,' he explains.

Thorough understanding of your industry extends to any specialist legislation that may affect your business. Anna recalls one unfortunate incident where a client attempted to sue her for breach of copyright.

'Luckily, it all turned out okay and I wasn't in the wrong,' she adds. 'But because I was unsure of the law, I had many sleepless nights until the issue was resolved.'

Overspending

Being financially savvy early on is particularly important, as overspending can be your business's death sentence. Greg, who started Wheyhey with a second-hand ice cream machine purchased for £150 from eBay, urges budding entrepreneurs to spend wisely - and remember that all initial expenditure must be recouped.

'It's easy to focus on getting your business started at any cost,' he admits. 'But don't lose sight of the cash that you're spending. Have a clear plan as to how and when you're going to pull the money back.'

You can make significant savings by being innovative in your sourcing, development and delivery. Dr Odon suggests that your first strategic partner should be your university and its extensive alumni network. This, he claims, could help you to keep costs low - and that isn't the only benefit.

'The worst thing about self-employment is the limited resources, whether it's time, manpower, knowledge or funding,' he concedes. 'Working in strategic partnership with others to bridge the gaps is therefore vital.'