Are you aware that errors made during your business's growth can quietly harm it for extended periods if overlooked?
These mistakes are not exclusive to new companies; even established ones, including seemingly successful ones with over a decade of experience, continue to commit them. This can lead to significant financial losses and time wastage.
Miscalculating Project/Service Duration
This is a substantial concern for both service-based and product-selling businesses. It's essential for service providers. If you fail to accurately assess the time needed for each service you offer, you'll face negative consequences, and your options will be limited to acknowledging the error and gaining experience from it.
The most effective approach to time estimation involves personally performing the task once or observing your most skilled employee complete it, and then incorporating a slight margin for error.
For companies dealing in products, timing challenges often relate to logistical factors, so exercise caution.
Unfamiliarity with YOUR Company's Figures/Incorrect Price Setting
Take note of the emphasis on "your." A common error is adopting competitors' prices without understanding their rationale.
Consider the predicament that would arise if you slash a competitor's price by 10% and begin selling.
❗ What if the competition's pricing structure is flawed, leading to minimal or negative profits!?
❗ What if your expenses surpass theirs!?
While competitor pricing can provide a starting point, it can't dictate your entire strategy.
Various industries have distinct cost variables crucial for project or product pricing awareness.
For pricing products, it's not solely the purchase cost that matters.
Labor and material expenses for services are only a part of hourly rates.
Employee costs extend beyond salaries, and not all employees contribute to labor costs.
Insurance is a universal company expense.
Numerous overhead costs must be factored into pricing.
Also, remember the significant but often neglected factor: quality. Standard services, product features, job site etiquette, in-store service, and warranties should all factor into your pricing.
Ensuring Compensation for Your Complete Effort & Expenses
While this might sound simplistic to some, many business proprietors would likely concede they've occasionally been overly generous.
Offering extra care occasionally is acceptable, but my concern lies with those who deliver exceptional quality yet fail to cover costs.
For instance, consider a service company where you provide a standard service that competitors don't. Simply undercutting their price isn't the solution; you must factor in the additional cost and prominently advertise its inclusion in your rate. Likewise, stores compromise themselves when they enhance customer service without charging. These actions incur expenses, and when competitors don't replicate them, they save money. By delivering superior service and subsequently undercutting prices, you're only setting yourself up for eventual failure, allowing competitors to swoop back in.
As a business owner, you must believe that your offerings warrant proper compensation.
When given the chance, explain the rationale behind your higher prices.
If customers object to your inclusive approach or superior treatment, they likely prioritize price over value.
Such customers aren't ideal for repeat business. Trust me on this.
Delayed Payment Woes
Yes, the classic cash flow problem. If your income covers expenses, this issue can be managed, mitigated, or at least alleviated to some extent.
Here's the approach:
Firstly, promptly invoice your clients. Surprisingly, many small businesses lack efficient invoicing procedures, despite the obvious objective of getting paid. It's easy for those responsible for transmitting billing information to be overwhelmed or lack the necessary organization.
The second step .in combating cash flow issues is to expedite client payments while extending the payment terms for vendors and employees. If feasible, limit employee payments to bi-monthly rather than more frequent intervals.
This approach is particularly useful for contractors; if weekly payments are a necessity, consider informing them upfront that the initial week's payment will be withheld, effectively gaining you a week's respite.
Lastly, consider credit options.
Obtaining a company credit card can facilitate necessary expenditures during cash flow shortages.
Ideally, secure a company line of credit, especially when dealing with clients who impose lengthy payment terms, such as those in government or commercial service work, often requiring 60 to 90 days to settle accounts.
Neglecting Robust Systems and Protocols
An excess of procedures (referred to as "bureaucracy") often propels individuals to initiate their own business ventures.
Regrettably, devoid of any established protocols and frameworks, there's no viable alternative.
Depending on the industry type, entrepreneurs must strike a balance between excessive procedures and disorder, leading to uncertainty.
Some fundamental instances requiring protocols involve invoicing, debt recovery, payroll, human resources (interviews, recruitment, leave, benefits, roles), production, equipment upkeep, inventory management, sales visits, and logistical operations, among others.
Even for a solo enterprise, establishing administrative procedures is essential.
This simplifies hiring temporary staff, subcontractors, and maintaining control over their tasks.
Lacking even a simplified framework for daily operations will inevitably result in significant complications as the company expands.
I cannot stress enough the significance of this, especially when welcoming new employees. While this advice might be familiar, I am a strong advocate for maintaining an employee handbook, even if you have only one staff member. It's astonishing how individuals can inadvertently disrupt business operations, merely because you compensate them.
Absence of Robust Processes and Protocols
An excess of procedures, often labeled as "red tape," is why many individuals venture into business ownership.
Regrettably, a complete lack of established systems and protocols is not a viable alternative.
Depending on the industry type, business proprietors must strike a balance or risk descending into chaos and uncertainty.
Essential instances requiring procedures include billing, collections, payroll, HR functions (interviewing, hiring, vacations, benefits, role delineation, etc.), manufacturing, equipment operation, maintenance, inventory, sales interactions, and logistics, among others.
Even a solo operation necessitates basic administrative procedures.
Having these in place streamlines hiring of temporary staff and subcontractors, ensuring oversight of their activities.
Without a simplified version of a system or process for routine tasks, you'll bear responsibility for exacerbating significant challenges as your company expands.
The importance of this cannot be overstated when onboarding new employees. While a familiar notion, I strongly advocate creating an employee handbook, even if you have just one employee. Astonishingly, lapses in this area can lead to predicaments for business owners, stemming from the simple act of remunerating them.
Overextending Your Efforts
This is a common mistake encountered by every entrepreneur.
The crucial aspect lies in recognizing the juncture when you're stretched too thin and initiating assistance.
The remedy involves understanding your strengths and being perceptive about tasks that don't align with your expertise.
If you excel in sales, immersion in daily operations is counterproductive. Neglecting sales for operational tasks leads to declining sales, eventually compromising operations themselves.
Reflect on this to ascertain if you're overextended:
Did you embark on entrepreneurship to toil 80+ hours a week?
Delaying Assistance Acquisition
Establish milestones to gauge when to enlist expertise in areas where you lack proficiency. Neglecting aid or deferring it can spell doom for a company.
Many entrepreneurs enter the business realm due to their adeptness in technical sales aspects.
For instance, if you excel in crafting widgets, your forte lies in production, and that's where your focus should be.
For sales and marketing, consider outsourcing to external firms or consultants initially, then transition to in-house hiring when feasible. Don't assume roles that don't align with your strengths; this hampers progress.
Three significant challenges often tackled solo, but frequently least understood, encompass legal matters, accounting/bookkeeping, and daily operations.
Chances are these are your weak points. If you lack a partner versed in these fields, prepare to seek assistance promptly.
Ideally, address this prior to business initiation.
While addressing these issues is beneficial at any juncture, the end of a year or season is an opportune period to ensure these pitfalls are avoided.
Allocate time to rectify issues; if solutions evade you, seek assistance.
If your schedule hampers thorough issue assessment, securing help is the prudent course.
