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Building a successful business takes time, hard work, and commitment. However, even with the best will in the world, there are still some common business mistakes which can trip you up.
One thing is certain – you’ll not get it right every time – and there’s nothing wrong with that, especially if it helps you learn for the next time. However, to give your business the best advantage, taking a look at some of the more frequent mistakes other business owners have made may help you avoid them yourself.
We’ve put together a 2-part series which identifies 10 of the most common business mistakes and what you can do about them.
Writing a business plan to describe your business (objectives, strategies, sales, marketing and financial forecasts) is like having a GPS to keep you on track, helping to guide you through each stage of starting and managing your business.
Most of the information you need is likely to be swimming around in your head already, and the act of getting it out onto a plan can help you to really clarify your idea, plus spot potential problems. It may even highlight that your great business idea isn’t quite as lucrative as you thought which, whilst disappointing, is better than investing in something which will cost you time and money.
Business plans are not one-time documents to file away once you tick it off your to do list. Reviewing your plan regularly will help you to measure progress and make any necessary changes as your business develops.
Your business plan will help you to understand how much investment is needed to get started and run your business, plus how much income you expect to make. If you’re approaching an investor or bank for a loan, they will want to see a fully formed business plan to give them confidence that they will see a return on their investment.
Alternatively, have a chat with Kevin Steel our Business Development Manager or Adrian Waite Chief Executive and they’ll be happy to help. You could also be eligible for support for this via our ScaleUp360 programme with Sheffield Hallam University.
If you go into business expecting to be rich overnight, you may become quickly discouraged – most businesses take years to achieve overnight success!
Establishing goals will give you a clear direction to work towards, helping you to achieve success much sooner than those who are working on the fly. Make sure that your goals are SMART (specific, measurable, achievable, realistic and timely) as vague or unrealistic ones can become an emotional drain and even damage your credibility.
Once you’ve identified your goals, you can make small steps towards them every day, keeping yourself and your business on track to success. Then, with time, perseverance and a little luck, you too can be an overnight success (in a few years).
Your marketing plan goes hand in hand with your business plan, detailing how you’ll let potential customers know about your products and services. Before writing your marketing plan, you’ll need to spend some time researching your market and customers so that you really understand them inside out.
Some places you can look are local directories, the business section of your local library, market research reports and trade associations. Remember to also check out your competitors, especially how they market themselves on their website and social media.
When it comes to your customers, the opinions of your friends and family is not enough! You really have to narrow down who your ideal customers are and find out what they think. If you’re opening a shop, you could stand in a chosen location and take notes. Online surveys are also a great way to understand more about your customers.
Once you’ve identified who you’re trying to reach and where to find them, it’s time to consider their pain points:
For example, if you’re a digital marketing agency your customers may be searching “how do I get more customers?” rather than “digital marketing agency”.
When you’ve found the answers to that, you’ll be in a better position to understand how to appeal to your customers, how to differentiate yourself from the competition and how they’ll react to your marketing efforts.
Marketing is often seen as an unnecessary expense and business owners often hold back from allocating money towards the promotion of their products and services. However, it’s a mistake to assume that customers will find you without doing any marketing.
When it comes to marketing, it’s important to give a clear and consistent message. You never know where, when or how a customer is going to hear about you and they’ll be confused about what to expect from you if your messages are mixed.
Marketing can take many forms, from traditional advertising through to digital marketing and word of mouth. The most effective method will be different for every business, but you’ll have a head start if you’ve done your market research and identified your ideal customers and how/where to find them.
Investing in your marketing does not always have to be expensive either. Our archive blog post ‘9 free or low cost ways to promote your business online’ has some really great ideas.
When business is tough, it can be tempting to cut the price of your products or services, thinking that it will mean more customers. However, this is a dangerous path to follow and could lead to you not being able to cover your business overheads. If your prices aren’t high enough to make a profit, your business will slowly fail as you attract more customers.
Setting lower prices could be a result of undervaluing yourself, a fear of failure or a lack of confidence but, doing so undermines your uniqueness and can also lead to resentment and frustration when you see a low return for all your efforts.
Additionally, once you’ve begun selling your products and services at a lower price, it can be difficult to increase. Many business groups on social media have recurring questions about increasing prices without losing customers, so it’s a common issue.
To create a competitive pricing structure for your business, do your homework and research your market. By benchmarking what the prices are in your industry and calculating what you want to earn, you can establish a realistic price.
You may be tempted to undercut the competition to try and win new business but remember that customers are often prepared to pay more for better quality or convenience. If you’ve calculated that your price is higher than your competitors, understand the extra value you are providing to justify a higher price and then tell your potential customers about it.
Failing to keep your costs under control can get you into trouble!
If you want (and are able to afford) the best of everything, then go ahead. However, if your financial situation is unable to support this, then there may be less expensive options which will do the job equally well. Creating a business budget (and sticking to it) is key to managing your costs.
It may be surprising to know that underspending can also be a potential pitfall, but your growth can be severely damaged by refusing to invest in your business. Cutting the wrong corners can also be more damaging in the long run. For example, a start-up business owner may decide to save costs on their new website by building it themselves on the free wordpress.com platform.
However, without specialist knowledge and experience, it will take much longer to create, plus the SEO and UX could be adversely affected. The free version of wordpress.com also inserts adverts throughout your website making it look unprofessional. Removing the adverts costs money and having other useful functionality such as Google analytics will cost more – often at a higher rate than the alternatives.
Even if you decide to delegate the accounts to a professional, it’s important for business owners to have a handle on their finances and daily cash flow so that informed and realistic decisions can be taken.
Equally important is understanding the difference between cash flow and profit (cash flow is the amount of money going into and coming out of your business, whereas profit is the revenue remaining after deducting business costs).
Many new business owners have the goal of making a profit, not realising that cash flow should be considered too. Profit is important, but a positive cash flow is needed to actually operate on a day to day basis.
To give an example, a business could be making a profit on their sales every month, but all their cash is tied up in either hard assets (buildings, transport and machinery) or accounts receivable (the money due for products or services delivered, but not yet paid for by the customer). In this situation, they have no cash available to pay their employees, pay their business expenses or to buy new materials which are needed to fulfil their next order.
However, having a positive cash flow (more money coming into the business than going out of it) does not necessarily mean that the business is making a profit as the money could have come from a loan rather than sales.
In summary, your profit figure can show you how successful your business is, but not whether it has the money to survive long-term. Conversely, an unprofitable business which is cash flow positive will struggle to remain that way for long.
You may have started working for yourself due to a passion for your product or service, to set your own hours, or to make more money. Whatever the reason, to really flourish, your business will also need your commitment.
There are so many challenges to overcome when running a business, from financial difficulties, market fluctuations and pandemics (very on topic) through to problems with employees and new competitors. Business owners therefore need to have the drive and resilience to see themselves through the setbacks.
Personal sacrifices are often made (particularly in the early days) when business owners forgo a salary or give up luxuries to keep the business afloat. These sacrifices sometimes spill into family life – there’s no clocking off after 8 hours if the business needs you there to get things done. It might be stock taking, doing the payroll, meeting with suppliers, working on your marketing or developing expansion plans.
It helps to remember that in challenging times, your drive, determination and resilience will help to maintain a positive outlook.
You may, by now, have picked up the fact that building a successful business takes time, hard work and commitment. However, it’s also important to know where your limits are and to find others who can handle the tasks that you either struggle doing, or which need more specialist knowledge.
In the early days, business owners tend to wear all the hats but, with growth, comes the need for delegation or outsourcing. Doing so will stop priorities from becoming diluted and free up your time to spend on building the business.
Trying to save money by not hiring staff or having difficulty delegating tasks can also damage your business growth. If you’re concerned about your ability to pay an employee every month, you could instead outsource projects to trusted businesses/freelancers providing services such as website design, graphic design, book keeping and content writing.
In the early days of your business, you probably had to ignore some of your family and friends who thought that you were making a mistake, and simply concentrate on what you thought were the right choices and decisions. However, not all advice and constructive criticism should be ignored.
If your customers give you feedback, take the time to really listen to what they’re saying. It can make all the difference between a lost sale and a loyal customer who will refer your business onto others.
When it comes to sales calls, welcome objections instead of fearing them. Objections mean that the buyer is engaged with what you’re saying, and you can then take the opportunity to add value to your message. They can also help you work out whether to pursue the call any further. So, when you receive an objection, really listen to understand what the actual concern is.
Listening to your employees can help to avoid a catastrophe in your business as they’re often the people closest to the problems. It also develops trust, identifies training gaps, increases staff engagement and develops employee retention. If that’s not enough, it will also lead to a happier and safer workplace!
Finally, running your own business can be a lonely job and a good business advisor will give you someone to bounce around your ideas and lend a helping hand. When talking to an advisor with relevant experience, listen fully to what they’re saying before working out how that might apply to your own business.
Most of us will have made one or more of these mistakes at one time or another but, armed with knowledge, you can be better prepared.
All tenants at The Business Village have free access to business support and coaching. Get in touch with ksteel@barnsleybic.co.uk to discuss this further.
