What is worse than not learning from your own mistakes? Not learning from someone else’s. Let others make the mistakes, wear the losses and grief … learn from what they do wrong and do right in your own business.
Here are my top 7 tips (or mistakes) that business owners commonly get wrong which frequently causes business failure.
- Business owners tend to overestimate their market. It’s a reality that sometimes there is not enough demand for a product or service that you can sell at a price that can deliver profit to your company. Do your research thoroughly and objectively. Better to know before you invest a heap of your time and money in a market which already is struggling or over saturated.
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- Contrary to popular belief — growth can sometimes chauffeur your business to failure. Some business owners, as soon as seeing the slightest growth, tend to move their businesses into markets that are not similarly profitable; or borrow too much money to sustain their business growth or buy up big with fancy premises, or luxury vehicle leases. Alternatively they take on huge jobs they can’t handle, due to lack of resources.
- Poor bookkeeping (or worse no bookkeeping) is a formula for a business disaster and sure to guarantee you fail. Business owners need to have a bookkeeper (or bookkeeping service) but that doesn’t get them off the hook when it comes to knowing about, and managing their finances. One of the first things I do with a new coaching client is ensure they FULLY understand their Profit & Loss Statement and Balance Sheet, plus I get them reviewing key fiscal reports weekly and monthly.
- Not having available funds when you need it. If there’s anything that business owners can learn from the global recession and its hard-hitting effects on businesses, it’s having access to cash for unexpected expenses and financial stresses, like losing a long-time customer or a reliable employee or the emergence of a new and more likeable competitor. This is where a savings plan comes into play. Having that money for ‘a rainy day’ is critical. Even the most savvy business owner will experience ‘rainy days’.
- Over-investment on fixed assets is another concern. Paying too much for utilities or raw materials may not impact on you dramatically in good times, but it sure will during tough times. One client of mine has gone from a multi-million dollar profit, to barely doing a couple of jobs a year, but still retails large assets, extra premises and other expenses which are now not needed for the much smaller operation, but still which cost a fortune. If your turnover downturns, be prepared to shrink your expenses. Be realistic on how long the downturn may last.
- Business owners think marketing is only needed when they need more business or running low on business. Marketing can take anything from 3 months to 3 years to bear fruit. In fact, I’d got a client from a marketing activity I’d performed 4 YEARS earlier. Marketing has a cycle and the worse time to market is when you’re desperate. My best advice is to market when you are busy, which also helps with cash-flow as you’re spending when you have the cash.
- Business owners think if they bury their head in the sand, or just work that bit harder, they will get their business back on track. If you are struggling, then you need to take action quickly. In 15 years of business, I openly admit I’ve known times of struggle and the thing I know helped me most was being able to ask for help and guidance, knowing exactly what I needed to do to get the business back on track and taking that action quickly. Every business experiences a challenge, but it’s how you handle that challenge which can be the difference between failure or reaching success!
I’ve made mistakes while I was starting my business but I’ve learned from them and I’ve learned from others. Avoid mistakes business owners make. I’ve helped other businesses grow as well. Call me at 0411 622 666 or email email@example.com.