When starting a business, you’ll be expected to make a number of assumptions, each with their own level of risk. For example, you’ll need to make an assumption about how much revenue you expect to generate. From this number you will be able to make decisions about how much inventory to purchase etc. The key to managing this risk is to make educated assumptions, rooted in research versus gut feelings.
Here are some of the common assumptions we hear at Small Business BC, and tips on how to avoid them:
1. My friends and family think that I have a great business idea, so it’s sure to be a success.
It’s great to receive positive reinforcement from friends and family, but it isn’t always a reliable indication of how your product or service will be received when you enter the market. Your friends and family are not your target audience. A better way to estimate the demand for your business is to conduct market research. There are three key areas that you should keep in mind: your target audience, your competition, and the industry landscape.
Where to turn: Meet with our Market Research Analyst and get the marketing tools and reports you need, or attend our two part seminar series on Market Research for Your Business. Both are great places to start if you’re looking to test out your business idea with a professional sounding board.
2. I don’t need a loan therefore I don’t need a business plan.
Although it’s not a requirement to complete a business plan when starting a business, it’s definitely a good idea. With any endeavour, you get out what you put in and it’s no different with business; the more planning and research that you do at the start, the more likely you are to succeed. One of the reasons why lenders require a business plan as a pre-requisite for financing is so they can gauge how sustainable a business idea will be. Having a concrete plan prepared will force you to provide evidence that your business will be financially sustainable, regardless of whether you need a loan. It will also act as a guide for you to follow through on those plans.
Where to turn: No matter where you are in your business planning process, our Business Plan Consulting and Review service can help keep you on course. Also, attend our Focussed Business Planning seminar series and turn your good business idea into a successful business venture.
3. It’s cheaper for me to do everything myself.
Most start-ups have limited financial resources, so the do-it-yourself route often seems like the best option. Although the upfront costs may be reduced with this option, certain mistakes can lead to much higher longer-term costs and complications in the future. There is of course an abundance of free information available on the internet, and there isn’t any harm in educating yourself, but there are certain things that really just require professional advice. The key is to understand your own limitations and seek external help when warranted. Legal and tax advice are the two most critical areas that often require professional assistance.
Where to turn: Small Business BC offers a number of Ask the Expert services that allow entrepreneurs to access expert advice at a fraction of the cost. From lawyers to accountants, HR professionals to business brokers, branding consultants to social media experts, tap into their wealth of knowledge and professional advice.
5. I’ve done the research so my business is guaranteed to succeed.
Planning and research will allow you to prepare for and manage your risks more effectively. However, you can never truly predict what will happen in the future. There are certain external factors that can occur that might just be beyond your control. Since plans are based on assumptions, you should always have a contingency plan in case your original assumptions and plans fall through.
By being aware of the assumptions that you are making, you can better understand what risks you are taking and where your vulnerabilities lie. Avoid falling into the trap of these common assumptions and instead utilize the many resources available to you to make a well-researched plan for success.
At Small Business BC, we receive a wide range of client inquiries. There is no question that is too obvious or too simple to ask. Never hesitate to seek information. The more that you question; the less that you assume and the better prepared you will be to successfully start your business with confidence.