Whether you’re a seasoned business owner or just starting out, no matter what you do, mistakes are bound to happen. And for every successful business, there’s another that fails – literally.
50% of businesses fail during the first five years – so you’ve got a 50-50 shot at this, whether that’s good or bad depends on whether you’re one of the ‘cup’s always half full’ or ‘half empty’ kinda people. Either way, to try and keep you on the right side of that statistic, here are some very common mistakes business owners make and better yet, some tips and a giant piece of advice to solve all of these issues and help you manage your cash flow.
Mistakes small businesses make:
There are so many mistakes small businesses make it would take writing a book to cover it all, but here we’ve done our best to pick out some of the serious ones, especially when it comes to financial mistakes – at the end of the day, it’s when the financials go sour that a business trips up…
1. You’re pricing your jobs too low
This could mean pricing your services or your products too low – which although may seem like a good idea to try and beat your competitors and lure in customers, is not a sustainable idea for the long run.
The problem with lowering your prices is you have to ask yourself what kind of customers you’ll be drawing in this way. You’re going to be luring customers who want to get the cheapest deal. These are not the loyal kind who love your product or service, and as soon as they find another provider who offers a better deal they’ll move right on. You have to ask yourself as well, how long can you really keep your prices so low? And what will happen when you raise them back?
Tip: Rather than trying to purely beat your competitors, look at your costs, add them all up, and figure out a fair price range from that. Better yet, see how you can make your product or service stand out from the rest – that’s a sure way to build up more loyal customers. If your product/service isn’t unique, then try and provide outstanding customer service, do something to make your business different.
2. Too much work and not enough employees
Other small business mistakes to avoid also include aspects of your employees. Specifically not having enough. This is a big problem especially if you’re in the early phases of your business. When there’s too much work and not enough employees, your current employees will be under constant stress from being overworked which could not only affect your quality but it could mean seeing some of your best employees walk out the door.
If you’re holding off from hiring because cash is tight, there’s only so long this situation can last.
Tip: It’s important to invest in building a strong and happy workforce to survive in the long run.
3. You don’t know what to do about lazy staff
This third common business mistakes is the opposite, which could come with just as many problems. When we say bad staff, we are talking about staff that are lazy, who are simply unmotivated to work. If your staff is simply underskilled, this is something that can be improved on be it through mentoring, training courses etc. but if your staff have a lack of willingness to work, then it’s a whole other issue. You’re essentially throwing your money in the trash. Searching and training new staff is tough so it’s better to invest in training your current staff.
Tip: If motivation is the main issue, you could try to motivate your team by setting concise goals that they need to hit and rewarding staff when they do hit those goals. You could also try some out of office activities to increase morale or little things in the office to increase working conditions (maybe plants, some snacks or end of the week ‘happy hour’). It’s really important to invest in keeping your employees happy and motivated.
If all else fails, then you’ll need to consider firing staff and re-hiring
4. You’re spending money on things with low ROI
ROI for those who aren’t sure stands for ‘return on investment’. If you’re making the mistake of spending money in the wrong area of your business, you are spending on things with low ROI. It takes time and experience to know what is and what isn’t a good investment in your business, but here’s an example:
If you’re spending a tonne of money on a fancy website but don’t actually know how to use it to increase sales then you have to ask yourself if that’s money well spent? You could get a very professional website for a fraction of the price on WordPress for example, and achieved the very same end goal.
Tip: It’s better to invest money where it falls in line with reaching your BIGGER goals. For example, if your main goal is to gain more customers or to increase revenue, then it may be a better idea to invest more heavily in your marketing. Before spending, first, you’ll obviously need to find the right lender (trustworthy and matches your needs) and then you need to think to yourself ‘will spending money in X place, give me a large ROI?’ and ‘will this help me to reach my goal?’.
5. You’ve got too much inventory
Lastly, this is one of those common mistakes business owners make that we see over and over is purchasing too much inventory.
When you have too much inventory, you’ve got physical goods literally tying your cash up and leaving you with less money to spend on other areas of your business.
We know that bulk-buying can lead to big discounts but you have to consider:
- the added labor costs
- more space being taken up
- Risk of the item not selling
- Higher insurance premiums
- The risk of the inventory losing value
Tip: You’ve got to analyze market trends before those big purchases, plan better, and ask yourself if it’s really worth bulk-buying for discounts in the end.
Cash flow issues
All of these common business mistakes point to one much larger problem and that is cash flow.
Cash flow problems cause the failure of 82% of businesses that fail according to a study by USbank by Jessie Haga.
To solve these cash flow problems threatening the stability of your business, you’ll need to make sure that you always have access to funds. This could be via an unsecured business loan or a line of credit. The great thing about a line of credit, if you don’t have to pay interest unless you draw from the funds. It’s like a safety net always there, ready to be drawn upon when you need it most.
Once you have your funds, put your funds to work by investing in training and hiring the right staff, investing in goal orientated areas of your business and before you know it, you’ll be on track to growing a sustainable, healthy business.