Avoid the pitfalls

Make a realistic assessment of what your start-up will require

Before you start, you should assess whether you have the stamina and personal qualities required? What is your capacity for work and what skills do you have as a business manager? Setting up a new business can take up a lot of your time and impact on those closest to you. Most people can cope with this for a while, but consider whether you are willing to sacrifice holidays, free time and time with your family in order to realise your dream. Try to estimate how many hours you will need in order to get the business up and running and prepare your loved ones for this. 

Do not overestimate your market

Many start-ups assume that the market is bigger than it really is. Investigate the market thoroughly before you really get started. Ask potential customers if the problem your idea aims to solve is actually perceived as a problem. Be sure to collect relevant market information and adjust the plans after input from customers before making important decisions.

Innovation Norway - how to succeed with your idea? (in Norwegian only)

Make sure your budget is not overoptimistic

A common pitfall is creating unrealistic budgets for the start-up phase. Revenues are often overestimated, while expenses are underestimated. This can lead to problems meeting your financial commitments. Make sure to include all possible costs when preparing budgets for the start-up phase and at least during the first year of operations.

Choose an appropriate organisational form

Choose a legal strukture that is appropriate for the risks that you will take on and the scope of what you will start with. For example, it may be a good idea to set up a private limited company instead of a sole proprietorship if you are taking a big financial risk.

Find good partners 

Look for collaborators who excel in areas different from your own. They can help increase your chances of success in the start-up phase.

Check all the formalities

Familiarise yourself with the requirements for your business, including what needs to be reported and to whom. Failing to meet reporting deadlines for various government agencies can cause problems. For example, you will be charged a fee if reporting and submission are delayed. Remember that you will have to submit reports even if your business is dormant.

Sound financial management is key

Send invoices to customers as soon as you have completed the assignment or sale. It is important that you receive the money quickly to maintain good liquidity and your ability to pay the company's bills on time. In the case of major assignments, you could agree to part-invoicing during the assignment period. Enter into written agreements with your customers which stipulate when invoices will be sent and what should happen if there are changes to the assignment. An amendment agreement is a contract between two parties that regulates changes to an existing contract. 

Get help

If you intend to do your own bookkeeping you need to familiarise yourself with the requirements. If you do not have sufficient time or the skills needed to prepare accounts yourself, you should ask someone to assist you with this. This will free up time for what you do best and what will generate money. Making mistakes in tax and value added tax calculations can quickly become an expensive business, especially if you later need assistance to rectify the situation.

Good agreements are vital

If you run a business together with other people, it is important that you avoid disagreements over the running and direction of the business. Before starting a business, you should sign an agreement which takes into account "both the good times and the bad". Examples of such agreements include a shareholders' agreement for limited liability companies and a partnership agreement for general partnerships.

Make sure you have enough start-up capital

It often takes longer than expected  to really get a business up and running. This means it will also take longer before you start generating revenue, while you still need to have enough funds to pay your obligations on time. So, make sure you have enough capital to finance the start-up.