James Caan on avoiding business mistakes
Instead of blogging about common hurdles that start ups face, I thought that I would share some of the mistakes that I, and our Start Up Loan recipients, have made; as let’s face it – everybody makes mistakes. Learning from other people’s mistakes can be a great way of avoiding business mistakes of your own.
Don’t get ahead of yourself
One of the biggest mistakes a business owner can make is getting caught up in the moment. It is easy to run with your idea and spend time and money on developing it rather than taking a step back and thinking to yourself – ‘is my idea really a viable business.’ It is natural when you have an idea to get excited. It is, however, absolutely vital for you to do your research. Know the market. Do your due diligence. Think carefully before taking the plunge. When I took over Benji’s, the high street sandwich chain, I lost £100,000 a week for six months before I had the conviction to shut it down. This was down to me getting too excited by my idea. I jumped in without researching into whether it was a viable business.
Ask the right questions
That said, when we first started up Hamilton Bradshaw, we over-analysed one particular deal to death. Six months down the line we decided not to go ahead with the deal. This deflated morale hugely and although I knew that it was absolutely the right decision I could not stop asking myself why it took us so long to reach that conclusion. The answer: we had been so drawn in to the detail that we had forgotten to ask the right, simple question. So when you are doing your research, make sure you are asking the right questions from the outset. Don’t get bogged down in the details. Look at the bigger picture. One of the best pieces of advice I have ever been given is if you’re going to fail then make sure that it happens quickly.
Know your start up’s legal requirements
Another mistake that I made early on in my career came from not ‘knowing the law.’ I relied too heavily upon professionals. I thought that I could pass the buck when it came to taking responsibility. You are ultimately the one responsible for your business, not those whose services you are paying for. I know that this is a common error that business owners make. One year we had miscalculated our PAYE. The following year the Inland Revenue informed us that we owed them money. I turned to the accountants and told them that they must have got the accounts wrong. My accountant retorted: “we produce the accounts; you are responsible for checking them and signing them off.” He was absolutely right.
One of our Start Up Loans recipients, Paula Kay, made a similar mistake with her business SuperFoodLx. SuperFoodLx produces luxury skin and hair care products using nutritional recipes which have been passed down through several generations of Paula’s family. As Paula’s business is in the cosmetics industry, there are certain laws and regulations that she must comply with. She sourced a laboratory to produce her products, assuming that as they were experienced at working within the industry, and that they would ensure she was complying with the relevant regulations. It transpired that they were not producing the required documentation to go with her products. They would only produce the certificates Paula required if she paid an additional large sum of money. Paula now knows that had she had done her homework and known from the outset what was required legally, she would have sourced laboratories who were providing this service. Instead she was left in a position where production had to grind to a halt whilst she tried to source another laboratory able to provide her with the service she needed. Her effort paid off everything is now back on track and progressing well, but she could have avoided the hassle and stress as well as costs incurred. Lesson learnt – know your legal responsibilities!
Analyse what went wrong
Every single business owner will make a mistake in their career. Whatever your mistake the key is analysing what went wrong. You must identify why the problem arose, identify the flaw and then work on making sure that you do not repeat a similar mistake again. Paula learnt a number of valuable lessons from her mistake, including the value of legal research which, in my opinion, is one of the most important things a new business owner can do.
Some mistakes can be easily rectified, others will result in certain ideas or businesses coming to an end. The important thing is to remember that a setback doesn’t equate to failure. Behind every successful business founder there are numerous stories of big mistakes. Remember this: you are not judged by the mistakes that you make but by how you deal with and learn from them.