Being aware of potential big and sneaky mistakes you might make prior to or as you launch your small business might prevent you from losing a lot of money and/or wasting a lot of time.
Underestimating How Much Your Time Costs: Time is money! Don’t underestimate your project or service time. If you don’t estimate your time to perform each and every service in your offerings, 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!
Not Setting Realistic Pricing Structures: 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 competitor as a starting point but you can’t base your whole strategy on it. You have to give your pricing structure the due diligence your business is worth!
Don’t Forget About Variable That Affect Costs like cost of labor and materials, cost of employees including insurance, quality control costs, and more…You need to factor these costs into your pricing structure. Not Charging For Your Time: We have all given away a ton of our time but knowing where to draw the line is imperative. There is nothing wrong with giving a little extra here and there to show you care. But remember that if you don’t value your time, neither will your customers.
Not Believing In Your Own Worth: If you don’t believe that you are providing valuable and worthwhile products or services, neither will your customers. Being the cheapest or lowest cost product or service, unless your prices are set realistically for your niche, are not always the best place to be. If your prices are higher than some of your competitors, and your potential customer or client is ONLY price shopping… they won’t choose your company anyway. I remember when I was running the Builder’s and Remodeler’s Association in my county, we ran remodeling workshops. One of the topics was pricing. The industry experts suggested that homeowners get three quotes and choose the middle one. Of course, there was much more to that scenario, but the point was that customers/clients should make evaluations and educated decisions NOT soley based on price.
Not Pay Attention To Cash Flow: Your business has bills to pay and you need to be sure your cash flow covers those bills. Make sure you have procedures or systems in place for generating invoices and billing customers so that you can cover your costs and stay in business.
Not Having Solid Systems and Procedures in Place: 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. Without this structure, no matter how large or small your business is, you will more than likely end up with chaos!
Not Tracking Advertising Results: If you are not measuring or tracking the results of your advertising efforts, you could be throwing money into the toilet!
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 on 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?
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.
Although looking for these problems 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 problems. If you don’t know how to reverse the problems, 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.
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