8 Big Little Enterprise Flaws
Here’s an interesting notion: Do you realize that you will find mistakes you can certainly make at various stages of your business” growth that can certainly be slowly killing it for months or even years should you never watch for them?
Well, these mistakes do exist and they are not just reserved for the rookie corporations. Several 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 many of time inside the process.
Although some of these big and sneaky mistakes seem aimed much more at service type businesses, 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.
Underestimating Project/Service Time- This is a big one and it pertains to service companies as well as corporations that sell a product. This really is a service company’s bread and butter. In the event you do not estimate your time to perform each and every service in your repertoire, you’ll get burned and there is little you could 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 Knowing YOUR Enterprise Numbers/Incorrectly Setting Prices- Notice I emphasized the word “your”. It’s a common mistake to use a competitor’s as your pricing gauge not having actually knowing why they use those numbers. Think concerning the nightmare you’ll get yourself into in the event you take a competitor’s price, cut it by 10% and then start selling. What if the competition has a poor pricing structure and is barely creating wealth or even losing money?!?! What if your costs are a lot more than theirs?!?! You might use competitor as a starting point but you can’t base your complete method on it.
Different industries have their own variables as far as costs go and you have to be aware of them for your project or product pricing. What you pay for a product you’re going to sell just isn’t the only price to have in your head whenever you are pricing products. Simply how much your labor and materials expense for a service is only a piece of an hourly rate. Employees expense a lot more than just salary and not every employee is part of your labor cost. Every corporation has insurance to pay for. You will find tons of overhead expenditures that need to be part of your price. Oh, by the way, the big one that several people forget about in their price is the top quality factor. What you include as ‘standard services” or ‘standard product features” as well as job site etiquette or in store service or warranties all need to go into your pricing. I”ll get to far more on why inside the next segment.
Not Charging for any of Your Time & Costs- This appears like a stupid statement to some but I bet most venture owners will admit that they have given away a little too much of the farm at times. Hey, you’ll find 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 concern me are those that put many of quality into their work or products or stores and do not cover the cost for it. As an example, say you operate a service business and your competitors do not 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. Stores undermine themselves, for instance, when they put a lot more folks on the floor for customer service but don’t charge for it. These things expense you money and when your competitors never do them it costs them less money. Put out better service and then under price them, and your competition just has to wait a little bit for you to fall on your face so they can certainly swoop back in.
As a business owner you need to think that you’re delivering your clients worthwhile wares that deserve to be paid for. Should you get the chance to explain why your prices are higher, then take that business and do it. If they do not like the fact that you include things that others charge extra for later or that you treat them better, then they are most likely completely price shoppers. You do not want them as regular customers anyway. Trust me.
Not Getting Paid Fast Enough- That’s right, the old cash flow issue. As long as you’re actually making enough money to pay the bills, this problem can certainly be solved, prevented or at least made to be not as poor as it could possibly be. Here’s the deal:
1st off all, bill customers very promptly. It’s very common for a modest business to not have the procedures or systems in place to get invoices generated and out the door in a timely fashion (see the next segment for a lot more). Again, this would seem unlikely since that’s the reason why we are doing the work- to receives a commission. But it’s very easy for the individuals responsible for getting this info to the billing folks to be too busy to get it there or not have enough organization to give it to them the correct way.
The second part to slowing down or stopping a regular cash flow crunch is to make the quickest payment deals possible with customers and the slowest possible with vendors and employees. If there is any way not to pay employees any more than twice a month, you better do it. Contractors always have an issue with this. In the event you must pay weekly, then tell them before they are hired that they’re going to be getting the 1st week held back, essentially buying you a week. It’s going to help, I assure.
Part three involves credit. If your business can certainly get a credit card, then get it. This allows for certain important things to be acquired (that you can certainly afford) that might come up during a cash flow crunch. In addition to this, especially in the event you have no choice but to deal with 45+ day customer payments, do your best to obtain a company line of credit. This really is a must should you plan on selling to the government or doing commercial service work. These clients often have 60 to 90 day wait periods.
To Fail to Have Solid Systems and Procedures in Place- Too many procedures (known as “red tape”) is the reason why several folks start their own enterprise in the first place. Unfortunately, having no procedures and systems in place at all just isn’t an alternative. Depending on the type of industry, venture owners must come to a happy medium or chaos and the unknown will ensue. Some fundamental 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.
Even an one person show needs to have some admin procedures in place. This will make it easier to hire temps and subcontractors and control what they are doing for you. Without at least a watered down version of a system or procedure to do everyday work, you are going to be to blame for causing several major headaches as your company grows. I can’t emphasize how important this is for whenever you bring on new employees. I’m sure you heard this before, but I am also a big proponent of having an employee handbook even for one employee. It’s amazing the trouble individuals could cause business owners because they allow you to pay them.
Spending Advertising Money Just to Say You Advertise- I would almost rather see my clients not advertise then to spend without regard to tracking the results. There is no point in a marketing campaign in the event you don’t put things in place that allow you to measure how well the plan is working. The other wasteful part of marketing that a lot of individuals make the mistake of doing, just isn’t tracking their previously productive campaigns. Why some people think that just because a $400 dollar a month ad worked once very well for one busy season, that it will automatically work every twelve months after that is beyond me.
Spreading Yourself Too Thin- This really is a classic mistake made by every entrepreneur. The key is to figure out whenever you are at that “wearing too several hats” point and start getting some help. The solution here is to know your strengths and to be able see whenever you are not performing the duties that demand these skills. If you are the very best sales person on the enterprise, 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?
To Not Get Help Soon Enough- Set goals to know when to hire people to take over where you’re light on understanding. Not getting help or waiting too long can kill a business. Most individuals who start a business do it simply because they are good at the technical end or the sales end. If you know the very best way to earn a widget, then your strength is in production and that is where your time ought to be spent. Hire an outside enterprise 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 business that you are not. It’s going to only hold you back.
The three big issues individuals like to tackle themselves but usually are least knowledgeable about are legal issues, accounting/bookkeeping issues and daily operations issues. The odds are that these three things are your weakest link so in the event you do not have a partner that has the background for these subjects, then be prepared to get help as soon as possible. It’s preferable that you do this when you start a business.
Although looking for these problems at any time is a great concept, the end of a calendar year or season is an excellent business interval to make sure you’re not making these errors. Take the time, or make the time, to fix these problems. In the event you do not know how you can reverse the problems, then get some help. If you really never have enough time to either figure out should you have these issues or know they are there and can’t break away long enough to do it right, then get some help.
Olawhole Lawrence is the founder of a NJ Internet Marketing firm and a NJ SEM services firm. For more on small businesses, visit the author’s blog.
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