Tens of thousands of new startups begin every year in the UK alone, and more than half of them will fail in the first 12 months. It seems that which part of the country the business is located can affect the outcome with Birmingham, Manchester and Lincolnshire being among the best places to start a new business. London does not do quite so well, but the businesses that do survive in the capital tend to grow larger quicker and end up more successful. The trade or profession you are in can also affect the likelihood of success, and hardware startups have less chance of failure than many other lines. They can still make fatal mistakes, though, so here are a few tips to help reduce the risk of this happening to you.
Where Possible, Reduce Costs with Modules
When you are designing an electronic function, you have the choice of a custom circuity or a module. Most products are a combination of the two, and it is unusual for something to be marketed using just modules. However, they do have benefits that hardware startups should take advantage of. Primarily, they provide a way to reduce your development costs and can mean that your product will be in the marketplace sooner.
Handle Your Cash Flow
A lack of cash can be the reason for a startup failing, but there are ways to manage your cash flow to improve your chance of success. The cheapest and simplest way of financing your business is to find suppliers and manufacturers that will give you favorable payment terms. This will help, but customers could take time to pay you and this is another problem altogether. Invoice factoring could be the answer to this issue. The factoring company pays you when you invoice or at the end of the month minus a fee. They then collect the money from your debtors.
Prototype Sooner Rather Than Later
As soon as you are happy with your design, you should make the prototype. The sooner you find any issues and put them right, the sooner your product can go on sale. This is not a cheap process, though, and it can be a good idea to get another engineer to review your design first.
Use Stock Components Where Possible
If you can use as many stock components as possible, it will make producing your product cheaper. These are parts that are mass-produced and will cost a lot less than having each part specially manufactured.
Use a Few Custom Plastic Pieces
Each part of your product that is plastic and needs to be custom made will need its own mold. These can cost many thousands of pounds, and the fewer you use, the cheaper the outlay to make your product will be. In most cases, the minimum will be two pieces, a top and a bottom, and keeping it to this sort of level could save you many thousands of pounds.
Most businesses fail because of a lack of funding or too little business knowledge. A good accountant and solicitor can help you to get the business side right, and the above tips will hopefully help to keep the financial problems at bay.