Earlier this month, we published Part 1 in our series of ‘10 common business mistakes and how to avoid them’ here covering business planning, goal setting, market research, marketing and pricing. In Part 2, we’re going to look at some financial aspects and the personal traits of business owners.
Before we get started, it’s important to remember that nobody is expected to be perfect or to get things right every time. The purpose of these posts is to highlight potential pitfalls and give some insight about what can be done when something trips you up.
6. Overspending (or underspending)
Failing to keep your costs under control can get you into trouble!
If you want (and are able to afford) the best of everything, then go ahead. However, if your financial situation is unable to support this, then there may be less expensive options which will do the job equally well. Creating a business budget (and sticking to it) is key to managing your costs.
It may be surprising to know that underspending can also be a potential pitfall, but your growth can be severely damaged by refusing to invest in your business. Cutting the wrong corners can also be more damaging in the long run. For example, a start-up business owner may decide to save costs on their new website by building it themselves on the free wordpress.com platform.
However, without specialist knowledge and experience, it will take much longer to create, plus the SEO and UX could be adversely affected. The free version of wordpress.com also inserts adverts throughout your website making it look unprofessional. Removing the adverts costs money and having other useful functionality such as Google analytics will cost more – often at a higher rate than the alternatives.
7. Only thinking of profit, not cash
Even if you decide to delegate the accounts to a professional, it’s important for business owners to have a handle on their finances and daily cash flow so that informed and realistic decisions can be taken.
Equally important is understanding the difference between cash flow and profit (cash flow is the amount of money going into and coming out of your business, whereas profit is the revenue remaining after deducting business costs).
Many new business owners have the goal of making a profit, not realising that cash flow should be considered too. Profit is important, but a positive cash flow is needed to actually operate on a day to day basis.
To give an example, a business could be making a profit on their sales every month, but all their cash is tied up in either hard assets (buildings, transport and machinery) or accounts receivable (the money due for products or services delivered, but not yet paid for by the customer). In this situation, they have no cash available to pay their employees, pay their business expenses or to buy new materials which are needed to fulfil their next order.
However, having a positive cash flow (more money coming into the business than going out of it) does not necessarily mean that the business is making a profit as the money could have come from a loan rather than sales.
In summary, your profit figure can show you how successful your business is, but not whether it has the money to survive long-term. Conversely, an unprofitable business which is cash flow positive will struggle to remain that way for long.
8. Not committing
You may have started working for yourself due to a passion for your product or service, to set your own hours, or to make more money. Whatever the reason, to really flourish, your business will also need your commitment.
There are so many challenges to overcome when running a business, from financial difficulties, market fluctuations and pandemics (very on topic) through to problems with employees and new competitors. Business owners therefore need to have the drive and resilience to see themselves through the setbacks.
Personal sacrifices are often made (particularly in the early days) when business owners forgo a salary or give up luxuries to keep the business afloat. These sacrifices sometimes spill into family life – there’s no clocking off after 8 hours if the business needs you there to get things done. It might be stock taking, doing the payroll, meeting with suppliers, working on your marketing or developing expansion plans.
It helps to remember that in challenging times, your drive, determination and resilience will help to maintain a positive outlook.
9. Doing it all alone
You may, by now, have picked up the fact that building a successful business takes time, hard work and commitment. However, it’s also important to know where your limits are and to find others who can handle the tasks that you either struggle doing, or which need more specialist knowledge.
In the early days, business owners tend to wear all the hats but, with growth, comes the need for delegation or outsourcing. Doing so will stop priorities from becoming diluted and free up your time to spend on building the business.
Trying to save money by not hiring staff or having difficulty delegating tasks can also damage your business growth. If you’re concerned about your ability to pay an employee every month, you could instead outsource projects to trusted businesses/freelancers providing services such as website design, graphic design, book keeping and content writing.
10. Not listening
In the early days of your business, you probably had to ignore some of your family and friends who thought that you were making a mistake, and simply concentrate on what you thought were the right choices and decisions. However, not all advice and constructive criticism should be ignored.
If your customers give you feedback, take the time to really listen to what they’re saying. It can make all the difference between a lost sale and a loyal customer who will refer your business onto others.
When it comes to sales calls, welcome objections instead of fearing them. Objections mean that the buyer is engaged with what you’re saying, and you can then take the opportunity to add value to your message. They can also help you work out whether to pursue the call any further. So, when you receive an objection, really listen to understand what the actual concern is.
Listening to your employees can help to avoid a catastrophe in your business as they’re often the people closest to the problems. It also develops trust, identifies training gaps, increases staff engagement and develops employee retention. If that’s not enough, it will also lead to a happier and safer workplace!
Finally, running your own business can be a lonely job and a good business advisor will give you someone to bounce around your ideas and lend a helping hand. When talking to an advisor with relevant experience, listen fully to what they’re saying before working out how that might apply to your own business.
Over this 2-part series, we’ve discussed 10 of the most common mistakes made when running your business, but there are plenty more which could have been included. Making mistakes is not always a bad thing – they’re how we learn and not making decisions for fear of making a mistake could be even worse.
However, knowing the potential pitfalls and working out how you can avoid them is a great way to save yourself time and hassle. Our tenants here at The Business Village get access to regular business advice and workshops, so get in touch if you’d like to chat about renting an office with us.
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