Here’s an interesting notion: Do you realise that you can make mistakes at various stages of your business’ growth that can be 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 for 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 wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem aimed more at service type companies, they fit the bill for almost any industry. I’ve done my best with the listings below to give examples to prove it.
Underestimating Project/Service Time
If you don’t estimate your time to perform 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 yourself or watch your best employee do the task and then throw in a minor 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 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 wrong 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.
Not Charging for All of Your Time & Costs
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 is those who put a lot of quality into their work or products or stores and do not cover its cost. For example, say you run a service company, and your competitors don’t do a specific standard service. You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise 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.
Not Getting Paid Fast Enough
That’s right, the old cash flow issue. As long as you are 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:
Bill customers promptly. It is widespread for a small business not to have the procedures or systems to get invoices generated and out the door quickly. Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is straightforward for the people responsible for bringing 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.
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. Contractors always have an issue with this.
Failure to Have Solid Systems and Procedures in Place
Too many procedures (known as “red tape”) are 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. Here are some basic examples where procedures or systems are needed – Billing, collections, payroll, hr, manufacturing, operating equipment, maintaining equipment, inventory, sales calls/visits and logistics.
Spending Advertising Money Just to Say You Advertise
I would almost rather see my clients not advertise than spend without tracking the results. There is no point in a marketing campaign if you do not put things in place to measure how well the plan is working. The other wasteful part of marketing is that many people mistake not tracking their previously successful campaigns. Why some people think that just because a $400 a month ad worked once very well for one busy season, that it will automatically work every year after that is beyond me.
Spreading Yourself Too Thin
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 functions to worry about. Think about this to help you figure out if you are spread too thin: Did you 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 of the sale. If you know the best way to make a widget, then your strength is in production, and that is where you should spend your time. 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.