People make mistakes in various aspect of life, likewise in small business.
Do you realize that there are mistakes you can make at various stages of your business’ growth and can slow than or kill your business? Bear it in mind that if such mistakes are made, it might cause u unpalatable situation in your business.
Many people who own companies are still battling with the mistakes made in the pass because they are not certain if they could get over it. The truth is that when necessary steps are taken, such mistakes can be overcome. This article will discuss 8 big small business mistakes to help you what you should be alert about.
Some of these big and unnoticed mistakes seem aimed more at service type companies; they really do fit the bill for almost any type of industry. Here are the lists of examples to explain this.
This type is really a big one and it has to do with service companies as well as companies that sell a product.
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 is an issue with logistics. So it is important you take note of this.
The word “your” is stressed because this has to do with you in particular, not any competitor. It’s a common mistake to use a competitor’s as your pricing gauge without really get the full details why such numbers are used. Imagine the trouble you will put yourself if you take a competitor’s price, cut it by 10% and then sell.
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? Competitor could be used as a starting point but avoids depending solely on it or building your whole strategy on it.
The variables of each company are different from one another. However, you need to be aware of them for your project or product pricing.
When a certain product is paid for, you are going to sell is not the only cost to have in your head when you are pricing products. Also, 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. There are tons of overhead expenditures that 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. More of this would be discussed further.
How does this sound to you? Stupid? Well the truth is most business owners will admit that they have given away a little too much of the farm at times. Yes, it is no bad giving a little extra to people. It is a sign of generosity and caring. This actually is not the main point here.
The point has to do with those that put a lot of quality into their work or products or stores and do not consider the cost or cover for it. For instance, suppose you run a service company and your competitors don’t do a certain standard service that you do.
Can you just undercut their price to steal a job? No. all you need to have is the cost to 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 under price 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 the owner of a business however, you need to be certain 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.
I wonder if you will consider these people as regular costumers.
The moment you start making enough money to pay the bills, this problem can be solved, prevented and made to be not as bad as it could be. Consider the deal below:
1. 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 (the next segment discusses more). Again, this would seem unlikely since that’s the reason why we are doing the work, that is, to get paid. But it is very easy for the people responsible for getting this information 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.
2. You need to slow down or stop a regular cash flow crunch so as 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, it will be better to do that. Cases have shown that contractors always have an issue with this. Suppose they have to be paid on weekly bases, let them know before they are hired that they will be getting the first week held back, essentially buying you a week. This saves you a lot.
3. Credit: If a credit card could be owned by the company, go for 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, ensure that all is done to get a company line of credit. You will need this as you plan on selling to the government or doing commercial service work. The clients waiting period interval is 60 to 90 days.
Procedures (also called “red tape”) are 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.
This depends 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.
A person show needs to have some admin procedures properly maintained. 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 for 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.
Some will prefer to meet their clients one-on-one rather than spending money on any advert.
There is no point in a marketing campaign if things are not well organized to help you measure how well the plan is working, there would be problem.
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 am not concerned anymore.
We will call this a classic mistake made by every entrepreneur. The point is to figure out when you are at that “wearing too many hats” point and start getting some help.
Also, to solve this, you will need 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 on 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?
To avoid such kind of mistake, you need to set goals to know when to hire people to help you where it necessary. Delaying such kind of assistance or help is very dangerous and can scrap your 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.
There are three big issues people like to tackle themselves but usually are least knowledgeable about. These 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. Ensure that this is done before you start a business.
Being alert to problems like this is good. However, the end of a year or season is an excellent business interval. So, ensure that 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, the best thing to do is seek for assistance.
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