Entrepreneurs should avoid these costly mistakes to thrive in their business
Consider this thought: Are you aware that there are errors that can occur at different points in the growth of your business, which could be gradually causing harm for months or even years if left unchecked?
These errors are not limited to new companies and startups. Even established businesses, including those perceived as successful due to their longevity, often make these mistakes, potentially resulting in significant financial losses and time wastage.
While certain significant and covert errors may appear to target service-oriented companies, they are applicable to virtually any industry. These mistakes are commonly observed among our business coaching and consulting clientele, and I have endeavoured to outline them with examples below, to help make your business results more fruitful.
1. Underestimating Project / Service Delivery Time
This is a significant issue that applies to both service-based and product-selling companies. It is the cornerstone of a service company's operations. Failing to accurately estimate the time required for each service offered can lead to negative consequences, leaving you with no choice but to accept the situation and use it as a learning experience.
The best way to estimate time is to do it once yourself or watch your best employee do the task. Take into account client liaison and revisions when the item is custom-made. For product companies, time becomes an issue with logistics so be aware!
2. Not Knowing Your Company Numbers / Incorrectly Setting Prices
Notice I emphasised the word “your”. It’s a common mistake to use a competitor’s as your pricing gauge without actually knowing why they use those numbers. Think about the nightmare you will get yourself into if you take a competitor’s price, cut it by 10% and then start selling. What if the competition has a bad pricing structure and is barely making money or even losing money? What if they are using that item as a loss leader? What if your costs are more than theirs? You can use competitors as a starting point to access the industry and market, but you can’t base your whole strategy on it.
Be really clear on your operating costs and service delivery costs. Make sure you are factoring in marketing costs, packaging costs, wages, cost-of-goods-sold etc.
3. Not Charging for All of Your Time & Costs
This seems like a silly statement to some, but I bet most business owners will admit they have given away too much of the farm at times. There is nothing wrong with giving a little extra here and there to show you care. But that’s not what I’m talking about here.
What concerns me are those who put a lot of quality into their work or products or stores and do not cover the cost for it. As an example, say you run a service company and your competitors don’t do a certain standard service that you do. You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront. Stores undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it.
These things cost you money and when your competitors don’t do them it costs them less money.
4. Not Getting Paid Fast Enough
That’s right, the old cash flow issue. As long as you are actually making enough money to pay the bills, this problem can be solved, prevented or at least made to be not as bad as it could be.
Here’s the deal:
Invoice customers promptly. It is very common for a small business to not have the procedures or systems in place to get invoices generated and out the door in a timely fashion. Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is very easy for the people responsible for getting this info to the billing people to be too busy to get it there or not have enough organisation to give it to them the right way.
I used to wait to the end of the month to do all the invoices, now I charge 50% upfront and 50% on completion for consulting projects to keep cash flow positive. While coaching has a combination of upfront payments or monthly recurring payments/installments. Find a solution that works for your business model.
Increase your vendor payment terms. The second part to slowing down or stopping a regular cash flow is to make the quickest payment deals possible with customers and the slowest possible with vendors and employees. If there is any way not to pay employees any more than twice a month, you better do it.
5. Failure to Have Solid Systems and Procedures in Place
Too many procedures (known as “red tape”) is the reason why many people start their own business in the first place. Unfortunately, having no procedures and systems in place at all is not an alternative. Depending on the type of industry, business owners must come to a happy medium or chaos and the unknown will ensue.
Some basic examples where procedures or systems are needed include onboarding clients, lead generation, marketing activity, invoicing, payroll, hr (interviewing, hiring, vacations, benefits, job responsibilities, etc.), manufacturing, operating equipment, inventory management, sales calls and business reporting to name a few.
6. Spending Advertising Money Just to Say You Advertise
I would almost rather see my clients not advertise than to spend without tracking the results. There is no point in a marketing campaign if you do not put things in place that allow you to measure how well the plan is working. And when you are tracking, optimise, optimise, optimise!
The other wasteful part of marketing that many people make the mistake of doing, is not tracking their previously successful campaigns. Why some people think that just because a $400 dollar a month ad worked once very well for one busy season, that it will automatically work every year after that is beyond me. As the online space becomes more competitive some old campaign strategies, simply don't cut it anymore.
7. Spreading Yourself Too Thin
This is a classic mistake made by every entrepreneur. The key is to figure out when you are at that “wearing too many hats” point and start getting some help. The solution here is to know your strengths and to be able to see when you are not performing the duties that demand these skills. If you are the best sales person in the company, you can’t get caught up in day-to-day operations. If you do, sales will slip and eventually you won’t have any operations to worry about. Think about this to help you figure out if you are spread too thin: Did you really go into business for yourself to work 80+ hours a week?
8. Not Getting Help Soon Enough
Set goals to know when to hire people to take over where you are light on knowledge. Not getting help or waiting too long can kill a company. Most people who start a business do it because they are good at the technical end or the sales end. If you know the best way to make a widget, then your strength is in production and that is where your time should be spent.
Hire an outside company or consultant to take care of the sales and marketing and then hire inside when you can afford someone full time.
Don’t be something to your company that you are not. It will only hold you back.
If any of these examples jumped out to you and you'd like some help to identify and improve your business, please reach out.
You can book a free consult to discuss.
We'd love to hear from you and welcome you to the fruitful family!
Comments