Growing your business
8 Classic Mistakes that all New Business Owners make
Learning from your mistakes is key to success and helps you to quickly move on from problems in the future. However, it’s typical for business owners to fall into the same traps and getting out of them can mean the difference between a successful business or spiralling into financial loss. So what are the most classic mistakes all new business owners make? Here are eight of the finest:
1. Extending credit and cutting prices
When business isn’t going so well, many entrepreneurs resort to cutting prices and extending credit in a bid to secure more revenue and custom. But, in reality, it can cause bad debts and loss of revenue in the long run.
Whilst all businesses of all sizes have their fair share of late payers and uncollectable accounts, it’s important to minimise the prospect of bad debts and slow paying customers.
To avoid this, ensure that you perform credits checks prior to doing business. You should also ensure that if you do offer credit, your customers know and understand the terms of payment before you exchange goods or provide a service. Taking on as much business as possible might seem like you’re on your way to getting rich quick, but remember that it’s sometimes better to have no business than give away something for free.
2. Not setting clear business goals
If you don’t have a clearly defined business strategy how can you expect to measure success?
If you don’t have a picture of the end result in your mind how will you know what to work towards? Vague and imprecise goals will simply breed average effort. Whilst working yourself into the ground isn’t recommended, if you set clear business objectives you might find that you’ll be able to work smarter, not harder, to achieve even greater success.
3. Not hiring help and trying to do it all
Some entrepreneurs and new business owners have a tendency to do everything themselves. This means that you take on too many roles and ultimately the business suffers. Whilst your commitment to your business requires your full effort and support, you might find that as your business grows, you will need help to reach your next phase of growth.
As an entrepreneur, you’re likely to have one or two natural talents. But as a business owner, it’s up to you to identify these strengths, and the areas of weakness, so you can get people on board who can help you where you’re not so strong. You gave birth to your business so you might find it difficult to hire the right person and hand over some of the responsibility. But, through careful selection, you can find someone to help you manage the business so you can free up your time to focus on other important activities. Great businesses are built upon exploiting the talents of many, not on person trying to be the master of many.
4. Letting emotions dictate business decisions
You’ve been with your business from the start, so it can be difficult not to let your emotions cloud your judgement: but letting your emotions rule the majority of decisions is wrong for many reasons.
For example, paying for expensive and cool advertising just to be competitive might be a good idea for a more established business, but it might not provide the return on investment for your business just yet. Similarly, spending money on overly expensive and unique equipment just to maintain a certain image isn’t a good idea when you’re just starting out. To make good business decisions ensure that you look at the facts and figures and allow them to influence your judgements.
5. Failing to develop their roles as leaders and managers
A successful business is reliant upon the strength of its leader. This doesn’t mean you should be an authoritarian, but you also shouldn’t be your staff’s best friend either.
A great leader is able to set the course for the business and communicate it constantly with the employees whilst inspiring them to reach business goals too.
Running a business doesn’t require exceptional talent, but it does necessitate sound business knowledge. Without it, you might find that you make the wrong decisions either based upon emotions as mentioned earlier, or simply through having poor managerial skills.
To make your business successful, you should first invest in yourself and learn whatever you can about your industry and profession – especially the everyday management tasks involved with running a business.
If you feel that your managerial skills are lacking, or leadership isn’t your strong point, it might be worth taking a management short course to help you steer your business forward.
6. Undervaluing yourself and your products or services
A lack of confidence in yourself and your abilities usually filters through to how you price your products and services. This is a dangerous route to take as it undermines your unique offering which can lead to financial issues as well as frustration at yourself.
Recovering from undervaluing your goods can be a long process, so you should carry out thorough market research as you begin your business’ journey to identify the best price entry point for your products and services.
7. Not having enough stock
Stock flow and management should be something you regularly undertake. Your stock levels are influenced by a number of factors. Supply and demand usually dictates how much stock you order in, based upon what’s been popular, so ensuring your inventory is topped up means that you can continue to make more sales and take on business.
If you’re not on top of ordering your stock you might find that you lose sales simply because you haven’t ordered in what your customers want. Imagine having to turn down business simply because you haven’t ordered enough of something! This is an incredibly disheartening situation for both you and the customer to be in and has happened to business owners the world over.
On the other hand, having too much stock can be damaging to a small business for a number of reasons. Storage costs can mount up if you’re holding on to excessive inventory, and this can even impact upon your insurance costs. There’s also the problem of goods depreciating and deteriorating. A good business model is to sell as much as possible as quickly as possible, but if you’re holding on to goods like food and drink, these will perish quite quickly, which will dent your profit margins.
Both of these issues can be completely avoided if you put in certain procedures to ensure that you manage your stock effectively.
8. Business finance is not created equal
There are numerous different financial options to choose from and not all were created equal. From banks to business payday loans, there’s certainly a variety of options with equally variable interest rates.
From time to time, business owners might require financing for operating purposes, such as paying suppliers, employees and overheads, as well as for anticipated future growth. While the requirement for securing funds may be urgent or substantial, it is critical for business owners to be well informed about their financing options, so as not to accept unreasonable demands from lenders that would either burden them with high interest or debt repayments.
Many businesses make the mistake of thinking that high street banks are their only source of business finance, but this simply isn’t true. More and more business owners are finding viable options to the products offered by the banks and indeed other providers of business loans.
Liberis offer an alternative financial solution which allows business owners to pay back through card transactions as opposed to fixed monthly repayments. Paying back as you earn means that your cash flow isn’t affected and you’re not jumping through hoops trying to meet steep repayments each month.