Traps to avoid with new ventures

Retailers are doing well in Rotorua

We are currently basking in the good news stories of our revived local economy.

The hospitality and accommodation providers are doing extremely well. Retailers are enjoying the sound of cash registers winding over and there is an increased sense of confidence that 2015 will be a good year for local business owners.

The good old saying of making hay while the sun shines seems to ring true here.

As existing businesses enjoy the increase in confidence I have no doubts that we will see new ventures start up as well.

Not trying to be the party pooper here, but I thought it would be timely to remind you all of the key reasons businesses fail so that we can make more hay, but more importantly ensure we avoid these pitfalls.

So what are some of the key reasons businesses fail?

-Going into business for the wrong reasons: You should have a passion for what you do and some real drive to make it work.

Going into business solely to make money, or to spend more time with the family, is not enough.

-Poor management: Business owners frequently lack skills and expertise around key areas such as finance, purchasing, selling, production and staff issues.

Unless business owners realise where they lack some skills and seek guidance they can find themselves in trouble.

Neglect of a business can also lead to its demise. Business owners/operators need to organise, plan and control all business activities - this includes market and customer research which tends to get overlooked in more established businesses.

-Insufficient Capital: Not knowing exactly how much it will cost to set up or insufficient working capital to ensure the business continues to operate.

Accurate cashflow projections are vital for every business to succeed. You need to know when funds will be available to meet the ongoing overhead costs.

-Lack of planning: Businesses that fail to plan are planning to fail!

Every business needs a business plan that is reviewed regularly. A business plan needs to include goals and vision, SWAT analysis, financial planning, marketing plan and competitor knowledge.

-Overexpansion: A leading cause in business failure is over trading.

Often business owners think a measure of success is how fast they grow their business and they take on more work that they can deliver on - slow and steady growth is what you should aim for.

- No website: In this day and age your customers are searching you and your competitors online. Put simply, if you do not have a website or low performing website you are missing out on business.

So now that you know some of the pitfalls - plan carefully and enjoy the year ahead.

-Darrin Walsh is chief executive of the Rotorua Chamber of Commerce.