5 Big Mistakes Affects The Growth ofSmall Business
Many small businesses out there are making big mistakes in running the company without realising that the mistakes are there. If this is allowed to continue, it can affect the enterprise for a long time, but the entrepreneurs are under the impression that they are successful that is a significant issue that needs to be corrected. Mistakes can occur at various stages, which will eventually kill your enterprise even after years of trading.
1.Underestimating the production time.
If you cannot estimate the time involved in preparing a project, it will become a serious problem and affect your profit. These problems can happen in companies providing services, for example if you are running an accounting business, and if you do not foresee the mess that your client would have created in writing up the books and quote a lower fee. You will find it difficult to go back and increase your rate when more time has taken to finalise the job; that means you have lost that money forever. Therefore, you got to make sure that you or your employees are not making mistakes like these as it will reduce your profits in the long term. Applies to all services and production companies that do not have a proper operating systems and procedures in place to be followed by everyone in the organisation.
2.Know your numbers for correct pricing
Anyone who is starting up a new business will like to check the competitor's pricing pattern, but you got to bear in mind, your competition's pricing system might not be correct. Prepare a business plan and do your costing of the product, taking into account of all the expenses involved in pricing your product, and then check your competitors pricing structure, to see whether you are in line with their prices. If you do not know your numbers and completely depend on your competitors pricing level, you might be making a mistake, in case that your opponents have made an error in pricing you are just copying them. Correct pricing is crucial, as you might not have any sales if the price is too high, and on the other hand if the price is low you will not have any profit and you cannot recover your costs.
3.How to get your creditors to pay you fast enough.
You have to set up a billing system and give a time limit to your customers to pay your bills, and if you find that they are not paying on time, you need to charge them late paying fees. If not, you are putting yourself in financial difficulties, and you will have cash flow problems and then find it difficult to meet the other necessary expenses. It is the common problem for small businesses not to have systems in place. Therefore, you should have a proper system in place to collect your money on a timely basis. Otherwise, you will end up borrowing money from the bank, or even you might use the credit card to pay bills, and I am sure that you might not have included that in your cash flow projections and it doesn't come under contingency expenses as well. One more thing, if you are not collecting your money from your creditors on time, you will find it difficult to meet your bills from your suppliers, and if they stop the supply, you will run out of stock.
4.Spending money on advertisement
Firstly, you have to study that suitable system to promote your business, without knowing the proper way of developing business, and if you start spending the money, it will begin to accumulate and eat up your profits. You need to try cheaper methods to help your business, to keep the costs down. Initially, the best way to promote your business, is through word of mouth, dropping leaflets, placing advertisements in the local newspaper. Having said this if you are running an advertisement campaign you must have the system in place to measure the results on a continues basis, your campaign might have worked once, but that does not mean it will work all the time. The crucial factor is, not to incur advertising costs in a wrong way, and when you find the proper channels to advertise you will not have enough cash to promote your business.
5.Entrepreneurs are trying to wear too many hats.
If you are setting up a business, you should never have attempted to do everything yourself without help; as it will take a long time to bring your business off the ground. You have to know your strengths and weaknesses and do what you are good at and then start delegating or hire someone to do in the area you need help. Many of the business owners need help in three areas; those are legal matters, accountancy and day to day operations. There are the couple of ways that can find a solution for these, which is looking for a partnership who have this knowledge, or outsource the work, or hire someone in-house to help you out on a day to day basis. Now you are aware that you are having these issues in your business, you should not allow it for too long, try and fix these problems as early as possible may be at the end of the year. If you leave it for too long without getting any help, it gets to a point that you will find it difficult to fix it, so, getting help as early as possible is the wisest thing to achieve your goal.
- OUR BUSINESS BLOG - Working towards Succecss
Working towards Success, Growing your business, teething problems in start up.