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5 Traps to Avoid When Starting Your Business

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  • 5 Traps to Avoid When Starting Your Business

    While economists continue to debate whether we're truly rising out of the recession or entering into a double-dip, one thing is clear: The employment sector is still in a slump. The strongest job growth seems to be in the small business sector, which has accounted for 65% (or 9.8 million) of the net new private sector jobs created in the US between 1993 and 2009, according to the Small Business Administration. The small business sector has actually seen a surge in activity: Research from the Kauffman Foundation indicates that the number of American businesses created in 2009 marked a 14-year high, surpassing the number of businesses created during the 1999 and 2000 high-tech boom.
    If you're thinking about starting or joining a small business in this economy, here are traps to avoid:
    Undercapitalization
    CNNMoney.com cites undercapitalization as the No. 1 reason businesses fail. New owners underestimate the amount of money they'll need to get started, or they overspend on expensive equipment and offices and blow through their budgets too quickly. They also might not take into account how long it takes to get cash flow started.
    Joanna Krotz, co-author of the Microsoft Small Business Kit, points out that customers don't always pay promptly, and businesses need to account for this. She recommends adding 50 percent to the amount of money you think you'll need to start your business. And be conservative with your budget until you're sure your cash flow is stable. For example, consider starting with a small office and used furniture and upgrade later.
    Lack of Research
    Startup Professionals founder Martin Zwilling wrote in Forbes magazine that entrepreneurs sometimes believe that because they're in love with an idea, everyone else will love it too. Even if you build a better mousetrap, you should make sure the world is interested. Market research and a thorough evaluation of your competition are crucial parts of your business plan.
    Selling Too Cheap
    Undercutting the competition may sound like a good strategy, but it's not if you end up selling your product or service for less than it costs you to produce. Krotz, recommends you consider not only your wholesale costs, but also overhead and the profit margin you need to .....read more http://news.bytrade.com/info/925-5-T...r-Business.htm
    Global B2B buy sell trade marketplace www.bytrade.com

  • #2
    Re: 5 Traps to Avoid When Starting Your Business

    Awesome share, this is so helpful for me and also for lots of people who want to start their business, I also want to start my real estate business, and if you have some tips or steps to start this than please share with me, I real need some important suggestions, looking forward to helpful advises.
    Apartments Review

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    • #3
      Re: 5 Traps to Avoid When Starting Your Business

      If you're thinking about starting or joining a small business in this economy, here are seven traps to avoid:

      1. Don't let the economy get you down. While many workers view precarious economic conditions as a time to hunker down in their jobs and try to weather the economic storm, others see it as a window of opportunity. Starting a business in a weak economic environment can have several clear benefits: The cost of doing business can decline because suppliers and partners may be more willing to negotiate on pricing and conditions, and the opportunity cost of lost income from a traditional job may be lower. Access to capital is also improving: The Small Business Administration's Office of Advocacy reports that in mid-2010 commercial banks started easing lending conditions while levels of venture capital investments increased.

      Of course, there are also precautions to starting a business in a weak economy: Discretionary spending is down, so businesses selling goods or services that appeal to budget-minded customers may have an easier time gaining new customers in this economy than sellers of full-priced luxury items. Similarly, do-it-yourself services and low-cost substitutes may fare better than full-service or premium alternatives. For example, self-service storage and organizational retailer Organize.com saw a greater than 10% increase in year-over-year sales from 2007 to 2008 and again in 2009. Explains Terry Shearer, CEO of Organize.com, "Even in a recession, people want to improve their homes, but they want to do it inexpensively. Buying good home products from a reasonably priced online retailer is a much less expensive way to improve your home than, say, hiring a construction team or designer."

      2. Don't think that an idea equals a plan. Too often people start businesses with a general notion of what they want to accomplish but lack a solid, well-conceived plan. While a business plan is always important, in a tough economy, it's even more vital to think critically about your product or service, customer acquisition strategy, pricing and promotion plans, and key logistics like inventory management and fulfillment. Similarly, it's important to be very clear about your unique business angle and your differentiation from competitors.

      3. Don't be an island. Though entrepreneurs tend to be well versed in a wide variety of areas, even the most skilled entrepreneur cannot expect to be an expert in every aspect of business. From IT issues like network maintenance and website development, to marketing and customer acquisition, to accounting, payroll and legal services, there's too much for most people to handle alone. Have a clear sense of your own strengths, and surround yourself with the right partners and advisors for the remaining tasks.

      4. Don't expose yourself to unnecessary financial stress. Starting a business can be extremely costly, both in terms of lost income from a full-time job and in terms of capital investments — but it doesn't have to be. Don't quit your day job too soon, seek outside investors in addition to your own personal assets, and consider lower-cost options for starting your business. For example, if you're going into a retail business, make sure you consider both brick and mortar and online business models, given the considerable difference in capital requirements for each model.

      5. If you build it, they may not come. Having a great idea and even a great skill and product are very useful in starting a business, but you also need to have a carefully thought-through marketing plan. Customers won't just come to you. You need to think through all of the tactics at your disposal — from newspaper and radio advertising, to online marketing, to good old-fashioned referrals — to consider how to acquire customers and then turn those customers into repeat buyers
      Small Business in India | Buying Leads | India Finance

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      • #4
        Re: 5 Traps to Avoid When Starting Your Business

        I am agree with you. Because these are very common mistake repeat by all of us when we start new business because at that time we all are on high an d never thinks about these basic things. Thanks a lots for sharing your ideas.
        Concrete Formwork | Concrete Products

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        • #5
          Re: 5 Traps to Avoid When Starting Your Business

          Its nice to have such discussions.. We all get to learn so much..
          Small Business in India | Buying Leads | India Finance

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          • #6
            Re: 5 Traps to Avoid When Starting Your Business

            Though entrepreneurs tend to be well versed in a wide variety of areas, even the most skilled entrepreneur cannot expect to be an expert in every aspect of business.
            _________
            PPC Management
            PPC Company

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            • #7
              Re: 5 Traps to Avoid When Starting Your Business

              Starting a business is exciting but always uncertain as there are so many aspects to be looked at and everything must function smoothly and without a hitch. Any small problem can grow to become a major issue in a new business, so it is important to be aware of what is going on in every area.

              We are a group of people who provide all kinds of help and advice for new entrepreneurs. We believe business is really the key to a rewarding life, though obviously success does not come easy. Please check out our website for great business ideas.
              Small Business Dog

              www.smallbusinessdog.com
              gita@uglydogmedia.com

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              • #8
                Re: 5 Traps to Avoid When Starting Your Business

                Great points, but I would add one more. Unfortunately most small business owners judge their success by how much they have in their pocket. They don't understand financials, therefore they:
                1. Don't know what is coming in the future.
                2. Can't see where there problems have arisen.
                3. Don't know when or how to correct.
                Their first warning is no money - and by then it is too late. Most of the "traps" you name would be seen and avoided with just the basic knowledge of financial statements. You would see undercapitalization, labor overruns, and inadequate gross profit.
                Marketing Plan | Marketing Plans | Business Plans | Marketing Services | Business Consultant

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                • #9
                  Re: 5 Traps to Avoid When Starting Your Business

                  Now, those phases each have their challenges, but it's the in-between phases that are the most dangerous. Great tips

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