Here’s an interesting notion: Do you realise 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 they 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 them… and are possibly losing a lot of money and/or wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem aimed more at service type companies, they really do fit the bill for almost any type of industry. I’ve done my best with the listings below to give examples to prove it.
1. Underestimating Project/Service Time – This is a big one and it pertains to service companies as well as companies that sell a product. 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 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 becomes an issue with logistics so be aware!
2. 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 bad 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.
3. Not Charging for All of Your Time & Costs – This seems like a silly statement to some but I bet most business owners will admit they have given away too much of the farm at times. 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 who 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. Businesses and stores often 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.
4. 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, this problem can be solved, prevented or at least made to be not as bad as it could be. Here’s the deal:
- Invoice customers promptly. It is very common for a business to not have the procedures or systems in place to get invoices generated and sent in a timely fashion. 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 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.
5. 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.
6. Spending Advertising Money Just to Say You Advertise – I would almost rather see my clients not advertise then to spend without 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.
7. 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 to see when you are not performing the duties that demand these skills. If you are the best sales person 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 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?
8. 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 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.