Pitfalls to avoid for Singapore entrepreneurs
Entrepreneurs are usually aware of the significance of the idea, timing, market and capital, however, what is more important is ‘sizing them up rightly’. Find out why it is important to get them right.
Starting something new is challenging and it is almost intimidating when your livelihood and life savings are at stake. First-time entrepreneurs take the plunge after much deliberation and many give up plum jobs to do so. There is no standard guidebook to learn from, because each idea, person and situation is unique. Certain issues are common for all businesses and so entrepreneurs are usually aware of the significance of the idea, timing, market and capital, however what is more important is ‘sizing them up rightly’.
Here are some things you need to take into consideration before you take the plunge.
Sizing up the idea: Once you hit on an idea, discuss it with people who can give expert feedback. Many times, entrepreneurs discuss ideas only with their family and friends and based their decisions to go ahead or not to on such discussions. Instead of speaking to just family and friends, gather a professional team of advisors, whose expertise can be of use down the road, and eventually when the venture starts to take shape. While friends and family can provide feedback based on experience and hearsay, the expert panel will be able to assess the potential of the idea from a professional angle, and cite examples on why a similar idea succeeded or failed, what can be improved, what should be trimmed, etc. However, spending too much time on sizing up ideas may result in delay of a potentially successful product or service to a market or may result in waste of precious time on a not-so-good idea. So, when you get the gut feeling, take the leap of faith.
Sizing up the time: Timing is crucial in business, the launch of a new product service or a campaign must be timed appropriately. A launch that is too early may find few or no takers and a launch that is too late will make you one among many. Pioneers always have a first mover advantage but leaping into a market which is not yet ready for the services will be fatal. For example, an e-learning application may become a surefire hit in a developed market where the IT infrastructure is superb and adaptation is widespread but e-learning applications are sparse. Launching the application in a market where the connections are slow, IT adaptation is nascent, networking is expensive will prove to be a recipe for failure. At the same time launching the application in a market which is replete with similar products will prove to be costlier, because however strong your USP is, you have to shout really loud to be heard in the milieu.
Sizing up the market: Start-ups must estimate the market size accurately; dealing with a market that is too small will fizzle out the business too quickly. Too large a market will make it a daunting task for a small start-up to effectively capitalise on. Niche markets are attractive only if the market value is high and the competition is small or totally absent. Large markets are attractive but if you are flying solo without proper partners such as a network of distributors or representative dealers, it will take too long a time to reach out to the market and it will drain the resources fast before you make any actual sales. So focus is very critical when you assess the size of the market.
Sizing up the capital: Startups that underestimate the capital required to set up and run a business often hit the wall soon, while entrepreneurs who overcapitalise their venture tend to spend valuable resource on building up their image, which more often than not, brings too little results. When resource is scarce, the management has a tendency to scrutinise more closely and spend it more judiciously. Lavish spending and paying more than what is worth will ultimately dry up the resources leading to pandemonium among restless investors who may just decide to reap the result of their investments at the same speed which funds flew out of the coffers.
Similarly a myopic approach when estimating the costs involved will lead to under financing a venture which may severely impact the momentum of the company. The working capital should take into consideration all possible contingencies and adequately cover them, otherwise too much of penny-pinching will eventually lead to a compromise in quality of everything right from raw materials to personnel and marketing campaigns, which may also lead to the doom of the venture.
Sizing up the price: Pricing the product and service optimally is essential. It should not be too low so that the productivity of the company comes at a high cost, and it should not be too high that potential customers turn away from the product and service. A product or service that is priced incredibly low from that of the competition may give an impression of substandard quality. Contrarily, a product priced significantly higher than the competition will end up promoting the competition on the retail racks. So go with the market and make the prices in sync and also ensure the product or service offering delivers the due value for that price. If you are new and there is no base for comparison, do not get tempted to skim the cream of the market, you may find that there are not many takers. At the same time, do not price yourself too low that you cannot sustain the promise. Optimum is the watchword. Price also cannot be changed too frequently, especially upward revisions. Therefore, it is always advisable to provide ample room for inflation, supply crunches etc., while arriving at a price for your product or service.
For startups it is important to hit the ground running, therefore the points mentioned above must be closely analysed and done right at the outset, so focusing your thought process on these issues are more crucial. Singapore offers a great business environment for startup entrepreneurs. Leave the process of incorporating your business, back end tax and accounting work and other legalities to the professionals, and focus on building the core competencies of your business venture.