8 BIG Small Business Mistakes
Summary:
Do you realize
that there are mistakes you can make at various stages of your business’ growth
that can slowly kill it for months or even years if you don’t watch for
them?
Well, these mistakes do exist and they are not just reserved for the rookie
companies. Many working businesses,
including those you might think are “successful” because they’ve been around
for 10+ years, are often still making them…and are possibly losing a lot of
money and/or wasting a lot of time in the process.
Keywords:
small business
help, business advice
Article Body:
Here’s an
interesting notion: Do you realize that
there are mistakes you can make at various stages of your business’ growth that
can slowly killing it for months or even years if you don’t watch for them?
Well, these mistakes do exist and they are not just reserved for the rookie
companies. Many working businesses,
including those you might think are “successful” because they’ve been around
for 10+ years, are often still making them… and are possibly losing a lot of
money and/or wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem aimed more at service-type
companies, they really do fit the bill for almost any type of industry. I’ve done my best with the listings below to
give examples to prove it.
Underestimating Project/Service Time- This is a big one and it pertains to
service companies as well as companies that sell a product. This is a service
company’s bread and butter. If you don’t estimate your time to perform each and
every service in your repertoire, you will get burned and there is little you
can do about it but bite the bullet and learn from it. The best way to estimate time is to do it
once yourself or watch your best employee do the task and then throw in a
little fudge factor on top of it. For product companies, time becomes an issue
with logistics so be aware!
Not Knowing YOUR Company Numbers/Incorrectly Setting Prices- Notice I
emphasized 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 your costs are more than theirs?!?! You can use competitors as a starting point
but you can’t base your whole strategy on it.
Different industries have their own variables as far as costs go and you need
to be aware of them for your project or product pricing. What you pay for a product you are going to
sell is not the only cost to have in your head when you are pricing
products. How much your labor and
materials cost for a service is only a piece of an hourly rate. Employees cost more than just salary and not
every employee is part of your labor cost. Every company has insurance to pay
for. Tons of overhead expenditures need to be part of your
price. Oh, by the way, the big one that many people forget about in their price
is the quality factor. What you include as “standard services” or “standard
product features” as well as job site etiquette or in-store service or
warranties all need to go into your pricing. I’ll get to more about why in the
next segment.
Not Charging for All of Your Time & Costs- This seems like a stupid
statement to some but I bet most business owners will admit that they have
given away a little too much of the farm at times. Hey, there is nothing wrong
with giving a little extra here and there to show you care. But either way,
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. Put out
better service and then underprice them, and your competition just has to wait
a little bit for you to fall on your face so they can swoop back in.
As a business owner, you need to believe that you are providing your clients
worthwhile wares that deserve to be paid for. If you get the chance to explain
why your prices are higher, then take that opportunity and do it. If they don’t like the fact that you include
things that others charge extra for later or that you treat them better, then
they are most likely completely price shoppers.
You don’t want them as regular customers anyway. Trust me.
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:
First of all, bill customers very 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 (see the next segment for more).
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 organization to give it to them the right way.
The second part of slowing down or stopping a regular cash flow crunch 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. Contractors always have an issue
with this. If you must pay weekly, then tell them before they are hired that
they will be getting the first week held back, essentially buying you a week.
It will help, I promise.
Part three involves credit. If your company can get a credit card, then get it.
This allows for certain important things to be bought (that you can afford)
that might come up during a cash flow crunch.
Better yet, especially if you have no choice but to deal with 45+ day
customer payments, do your best to get a company line of credit. This is a must if you plan on selling to the
government or doing commercial service work. These clients often have 60 to 90-day wait periods.
Failure to Have Solid Systems and Procedures in Place- Too many procedures
(known as “red tape”) are the reason why many people start their own businesses 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 billing, collections,
payroll, HR (interviewing, hiring, vacations, benefits, job responsibilities,
etc.), manufacturing, operating equipment, maintaining equipment, inventory,
sales calls/visits, and logistics to name a few.
Even a one-person show needs to have some admin procedures in place. This will make it easier to hire temps and
subcontractors and control what they are doing for you. Without at least a watered-down version of a
system or procedure to do everyday work, you will be to blame for causing many
major headaches as your company grows. I can’t emphasize how important this is when you bring on new employees. I’m sure you heard this before, but I am
also a big proponent of having an employee handbook even for one employee. It’s
amazing the trouble people can cause business owners just because they allow
you to pay them.
Spending Advertising Money Just to Say You Advertise- I would almost rather see my clients not
advertise than spend without regard to 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.
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, it will
automatically work every year after that is beyond me.
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
salesperson 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?
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.
The three big issues people like to tackle themselves but usually are least
knowledgeable about are legal issues, accounting/bookkeeping issues, and daily
operations issues. The odds are that
these three things are your weakest link so if you don’t have a partner that
has the background for these subjects, then be prepared to get help as soon as
possible. You should do this before you start a business.
Although looking for these problems at any time is a good idea, the end of a
year or season is an excellent business interval to make sure you are not
making these errors. Take the time, or
make the time, to fix these problems. If you don’t know how to reverse the
problems, then get some help. If you
really don’t have enough time to either figure out if you have these issues or
know they are there and can’t break away long enough to do it right, then get
some help.
Comments
Post a Comment