Here’s an interesting thought: Do you realize that there are mistakes you can make 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 these mistakes are not just reserved for the rookie companies. Many working businesses, including those you might think are “successful” because they’ve been around for 10+ years, are often still making these mistakes… and are possibly losing a lot of money and/or wasting a lot of time in the process.
Check out the example of mistakes below to prove it.
Mistakes: Underestimating Project/Service Time- These mistakes are big ones and they pertain to service companies as well as companies that sell products. This is a service company’s bread and butter. 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 this mistake.
Mistakes: Not Knowing YOUR Company Numbers/Incorrectly Setting Prices- Notice I emphasized the word “your”. Common mistakes are 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 bad pricing structure and is barely making money or even losing money?!?! What if your costs are more than theirs?!?! You can use a competitor as a starting point but you can’t base your whole strategy on it.
Different industries have their own variables as far as costs go and you need to be aware of them for your project or product pricing. What you pay for a product you are going to sell is not the only cost to have in your head when you are pricing products. 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. Some businesses have insurance to pay for. There can be several overhead expenditures that need to be part of your price.
Mistakes: Not Charging for All of Your Time & Costs- This seems like a stupid statement to some but I bet most business owners will admit to making these mistakes and that they have given away a little too much of the farm at times. Hey, 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 are those that put a lot of quality into their work or products or stores and do not cover the cost for it. As an example, say you run a service company and your competitors don’t do a certain standard service that you do. You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront. Stores make mistakes and undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it. These mistakes 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 make mistakes and fall on your face so they can swoop back in.
As a business owner you need to believe 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. Don’t let your potential clients make the mistakes of undervaluing your services or products.
Mistakes: Not Getting Paid Fast Enough- That’s right, the old cash flow issue. As long as you are actually making enough money to pay the bills, these mistakes can be solved, prevented or at least made to be not as bad as it could be.
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 (see the next segment for more). Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is very easy for the people responsible for getting this info 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.
Mistakes: Failure to Have Solid Systems and Procedures in Place- Too many procedures (known as “red tape”) is 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. Depending 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.
Even a one person show needs to have some admin procedures in place. 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, it will cause many major headaches as your company grows. This is extremely important to have when you bring on new employees.
Mistakes: Spending Advertising Money Just to Say You Advertise- I would almost rather see my clients not advertise then to spend without regard to tracking the results. There is no point in a marketing campaign if you do not put things in place that allow you to measure how well the plan is working. 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 is beyond me.
Mistakes: Spreading Yourself Too Thin- This is a classic mistake made by every entrepreneur. 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 see when you are not performing the duties that demand these skills. If you are the best sales person, 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?
Mistakes: Not Getting Help Soon Enough- Set goals to know when to hire people to take over where you are light on knowledge. It is a mistake to not get help or waiting too long and can kill a 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.
Avoid those mistakes!
The three big mistakes people like to tackle themselves but usually are least knowledgeable about are legal issues, accounting/bookkeeping issues and daily operations issues. The odds are that these three mistakes 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 to avoid those mistakes.
Although looking for these mistakes at any time is a good idea, the end of a year or season is an excellent business interval to make sure you are not making these errors. Take the time, or make the time, to fix these mistakes. If you don’t know how to reverse the mistakes, 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, then get some help.
Contact me today to discuss how to avoid making some of these business mistakes.
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