Startups: five mistakes to avoid

It's no secret the UK's startups have seen huge challenges in recent years, with interest rate hikes, rising inflation, and labour shortages putting some serious brakes on the sector's growth.

All the more reason why startups can't afford to get complacent...especially those that aim to ride out the crisis by adapting what they do.

Like all SMEs, we had to start somewhere and we've learnt a few things along the way.

Nobody gets it right all the time (that'd just be boring), but here are five mistakes that could cost your startup more than just a little inconvenience...

5 mistakes startups make (and how to avoid them)

1. Muddling your branding

According to the design wizards at crowdspring.com, confusing, generic, or inconsistent branding can easily set back your business. If you don't know how to communicate who you are and what you do, how can you ever expect customers to trust your services?

That's why we work hard on our tone of voice to make sure we always explain insurance as simply as possible. We also use a specific shade of green – and a lot of it.

Your branding should convey what you want people to know about you. For example, your company might be fun, modern, or caring. That means inconsistent branding not only looks aesthetically dodgy, it sends your clients mixed messages about your business.

2. Underinsuring your startup

This isn't just a sly attempt to try to plug insurance, honest. But clearly it's a subject we're going to have an opinion on.

According to the latest UK business insurance statistics, almost half (44%) of all SMEs haven't any commercial insurance at all. Meaning they're completely exposed to the consequences of workplace accidents and mistakes.

Apart from that, it's thought up to 40% of SMEs could be underinsured, forcing them to cover either all or a portion of a claim themselves.

Coupled with high claim rates and the fact that startups are often financially fragile, shelling out to resolve a claim could be disastrous. Setting up the right startup insurance as soon as you're in business will limit your exposure to damaging claims.

3. Neglecting tax laws

When you're an employee, tax is a necessary evil. At least you have the luxury of someone else sorting it out.

However, when you're running your own company, you’re on your own. That means organising your own national insurance, income tax, and VAT. Oh, and don't forget your annual tax returns.

We won't deny it: it’s a faff. But failing to do so can result in a series of unpleasant fines from HMRC. For example, you can expect a £100 fine if your tax return is just a day late, plus additional fines depending on how long you take to pay up.

A good source of advice is the HMRC website. It provides information on deadlines, as well as how to pay. Another is Startup Donut, which provides tax and national insurance advice specific to startups and small businesses.

4. Poor or non-existent market research

In the words of Startup Donut, market research can be "the difference between success and failure".

You might have the best idea in the world, but unless you know your potential customers, your product, and who your competition is, you could still end up floundering.

Luckily, the lovely people at Startup Donut have created this helpful guide to market research. Set yourself clear goals before you start, try to be as accurate as possible, and don't ignore your results if they contradict your expectations.

It's time-consuming, but strong market research is the best way to kick-start most startups.  If your business were a house, think of market research as the foundations.

5. Ignoring trends

For a while, X (formerly Twitter) and Facebook were the full extent of our social media presence.

We noticed more of our audience hanging out on LinkedIn and so decided to re-focus our efforts. Since then, we haven't looked back. We've ditched X and now use LinkedIn almost as much as Facebook.

We're not saying you should blindly follow every business trend you see, but you shouldn't disregard them for the sake of individuality, either. Assess each trend on an individual basis; how are your competitors benefiting from it, and how can it help you?

Business trends could be a passing fad, or a new way of doing things. You won't know until you've investigated. Besides, trends happen for a reason...if it was a bad idea, nobody would copy it, would they?

Start thinking

It’s not an exact science, but avoiding these five clangers should give startups like you more of a fighting chance.

In the meantime, you can browse our website for more advice and info on startup insurance. Or give our friendly team a call on 0345 222 5391.