8 Big Small Business Mistakes
Here’s an interesting notion: Do you realize that there are mistakes you can make at different stages of growing your business that can slowly kill it for months or even years if you don’t look for them ?
Well, these mistakes do exist and they are not reserved for novice companies only. Many businesses that work, including those that you may think are successful because they have been around for 10+ years, are often still doing them and maybe losing a lot of money and / or wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem to target more service-type companies, they really fit the bill for almost any kind of industry. I’ve done my best with the lists below to give examples to prove it.
Project / Service Time Underestimation – This is a big one and belongs to service companies as well as companies selling a product. This is an enterprise bread and butter. If you don’t value your time to perform every service in your repertoire, it will burn and there is very little you can do about it but bite the bullet and learn from it. The best way to evaluate your time is to do it yourself or watch your best employee do the job, and then throw in a little fudge factor. For product companies, time is a problem with logistics, so be careful!
Not knowing your company numbers / Incorrect pricing – Notice I highlighted your word. It is a common mistake to use a competition as a price gauge without really knowing why they use those numbers. Think about the nightmare you will get yourself if you get a competitor’s price, cut it by 10% and then start selling. What if the competition has a poor pricing structure and is barely making money or even losing money?!?! What if your costs are more than theirs?!?! You can use competition as a starting point, but you cannot base your entire strategy.
Different industries have their own variables in terms of costs and you need to be aware of them for your project or product price. What you pay for a product you will sell is not the only cost to have in your head when you are pricing products. How much your work and materials cost for a service is only a fraction of the hourly fee. Employees cost more than salary and not every employee is part of your labor cost. Company Every company has insurance to pay. There are thousands of extra expenses that should be part of your price. Oh, by the way, the biggest thing many people forget about their price is the quality factor. What you include as standard services or standard product features, as well as site labels or in-store service or warranties, should all come down to your pricing. I’ll get more about why in the next segment.
Not Charging for All Your Time and Expenses – This seems like a dizzying statement to some, but I bet most business owners will admit they’ve donated a little more farm time and time again. Hey, there’s nothing wrong with giving it a little more here and there to show you care. But either way, that’s not what I’m talking about here. What bothers me are the ones who put a lot of quality into their work or products or stores and don’t cover the cost for it. As an example, say you have a service company and your competitors do not do a specific standard service you do. You can’t underestimate their price for stealing a job; you have to have that cost covered at your rate and advertise the fact that it comes with the back price. Stores hurt 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 do not make them, it costs you less money. Put better service and then below their price, and your competition will only have to wait a little for you to fall on your face so they can be diminished.
As a business owner you have to believe that you are offering your customers valuable goods that deserve to be paid. If you get the opportunity 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 handle them better, then they are most likely completely price buyers. You don’t want them as regular customers anyway. Believe me.
Not Paying Enough – Simply, the old cash flow issue. As long as you are earning enough money to pay your bills, this problem can be solved, prevented or at least made not as bad as it could be. Here’s the deal:
First, the bill customers very quickly. It is very common for a small business not to have the procedures or systems to get the bills generated and get out the door in a timely manner (see next segment for more). Again, this would seem impossible as this is why we’re doing the job – getting paid. But it is very easy for the people in charge of getting this information to the billing people to be too busy to get there or not have enough organization to give it properly.
The second part to slowing or stopping a regular cash flow stalemate is to make the fastest payment arrangements possible with customers and the slowest possible with vendors and employees. If there is any way you don’t pay employees more than twice a month, you better do it. Contractors always have a problem with this. If you have to pay weekly, then say before hiring that they will receive the first week held back, basically buying you a week. It will help, I promise.
The third part includes loans. If your company can get a credit card, then get it. This allows for some important things to be purchased (that you can afford) that can come during a cash flow crisis. Better yet, especially if you have no choice but to handle customer payments 45+ days, do your best to get a company credit line. This is a must if you are planning to sell to the government or do commercial service work. These clients often have waiting periods of 60 to 90 days.
Failure to Achieve Solid Systems and Procedures in Place – Many procedures (known as red tape) are why many people start their own business in the first place. Unfortunately, having no procedures and systems at all is not an alternative. Depending on the type of industry, business owners must come to a happy chaos or chaos and the unknown will ensue. Some basic examples where procedures or systems are needed include billing, collection, pay, time (interviewing, hiring, breaks, benefits, job responsibilities, etc.), manufacturing, operating equipment, equipment maintenance, inventory, calls / sales and logistics visits to name a few.
Even a person’s appearance must have some administrator procedures. This will make it easier to hire temples and subcontractors and control what they do for you. Without at least a watery version of a system or procedure for doing chores, you will be blamed for causing a great deal of headaches as your company grows. I can’t stress how important this is when bringing in new employees. I’m sure you’ve heard this before, but I’m also a big proponent of having a manual for an employee. It’s amazing the trouble that people can cause business owners just because they let you pay them.
Spending money on advertising Just to tell you that you advertise – I would almost prefer my clients to not advertise, then spend no matter tracking results. There is no point in a marketing campaign unless you put things in place that allow you to measure how well the plan is working. The vain marketing piece that many people mistake to do is not following their previous successful campaigns. Why do some people think that just because a $ 400 a month ad worked so well for a busy season, that it will automatically work every year since it’s beyond me.
Spreading yourself too thin- This is a classic mistake made by any entrepreneur. The key is to understand when you are in that many hats outfit and start getting help. The solution here is to know your strengths and be able to see when you are not performing the tasks that require these skills. If you are the best sales person in the company, you cannot get caught up in the day-to-day operations. If you do, the sales will slide and you will eventually not have any operations to worry about. Think about this to help you figure out if you are spread too thin: Have you really got into the business of working 80+ hours a week yourself?
Don’t Help Soon Soon – Set goals to know when hiring people to take over the place where you are a light on knowledge. Not having help or waiting too long can kill a company. Most people who start a business do this because they are good at the technical end or sales end. If you know the best way to make a widget, then your strength is in production and this is where you should spend your time. Hire an outside company or consultant to take care of sales and marketing, and then hire interns when you have the opportunity for someone full. Don’t be something about your company that you are not. It will only hold you back.
The three big issues that people like to deal with themselves, but are usually less familiar with are legal issues, accounting / accounting issues, and day-to-day operations issues. Chances are that these three things are your weakest link, so if you do not have a partner with background in these subjects, then be prepared to get help as soon as possible. It is preferable to do this before starting a business.
Although looking for these problems any time is a good idea, the end of a year or season is a great business interval to make sure you are not making these mistakes. Take the time, or take the time, to fix these problems. If you do not know how to turn problems around, then get help. If you really do not have enough time to figure out if you have these issues or know that they are there and you cannot break off as long as you do it well, then get help.