How To Avoid the Common Pitfalls of Launching a New Business
by Dominic Basulto, contributing writer
When launching a new business, knowing what NOT to do is often just as important as knowing what to do. That’s why you need business experts in your corner, giving you the type of coaching and advice that you need to avoid the classic pitfalls of launching a new business. Here’s a closer look at a few common challenges faced by first-time entrepreneurs, and how a business coach can help to avoid them.
Creating a product when there’s no market for it
Too many entrepreneurs try to rush a new product to market, without even considering whether there might be a real market for it. Sure, some people might buy the product now and then, but is there really enough sustained demand for that product to support a new business? With the help of a business coach, you can avoid this problem entirely. For example, a business coach can help you develop a market study to gauge overall demand for your product, and then give you a sense of the overall competitive landscape for your new product.
Failing to create a competitive advantage for your new product
Billionaire investor Warren Buffett is famous for saying that he will only invest in a business that has an “economic moat” around it. What he has in mind here is that the most successful companies have an effective, proven way to defend their business against rivals. The image here is of a medieval castle, defended by a moat around the perimeter, in which the only way into the castle is via a tiny drawbridge. That’s what you are trying to create for your business.
However, most new startups fail to consider this “economic moat” concept. If the plan is to become the low-cost provider of a certain product or service, and if “price” is your moat, that probably won’t work because as soon as Amazon or Walmart decides to offer that product, your business is never going to survive once they decide to storm your castle. So business coaches can play an important role here, advising you on how to create a moat around your business.
Focusing on sales and forgetting about cash flow
There are plenty of reasons why businesses fail, but the root cause is that they simply run out of cash to fund operations. So cash flow needs to be a priority from Day 1. Cash flow is what enables you to keep the lights on at night, pay your vendors, and pay your employees. The problem is, many entrepreneurs may not have a background in finance or accounting, and so they focus on what they can measure very easily – and that’s sales. They assume that, as long as sales are increasing, everything is good. A business coach can help you figure out the right financial metrics for your business in order to optimize cash flow. In short, a business coach can help to give you the sort of big picture view of your company that you need in order to be successful.
As you can see, knowing what NOT to do is just as important as knowing what to do when launching a new startup. With the help of a seasoned, savvy business coach you can learn how to avoid all the common pitfalls of launching a new business.