There are seven big mistakes that people make when starting a business, or new division of their company. I have seen this happen over and over again, and it tends to hold back a business’s success. There are businesses out there that do everything right, but one small tweak in the wrong direction can completely collapse it.
Let’s take a look at these Seven Biggest Mistakes and see if we can learn from these.
One: Expanding too quickly
Mistake number one is over expanding after experiencing success quickly.
So for example if you started a small business, but at the same time you are working somewhere else, and it’s a good stable job, you don’t want to quit your job and go risk everything for an idea that hasn’t proven itself yet.
Let’s say that you’re in business already and you are thinking of launching a new division, you’re not going to just stop what you’re doing, until you have experienced some success.
Lets say you go out and you start a business selling handcrafted guitars. Right from the start there is a big demand for your product in the local market, so you decide to start selling your guitars state wide, and the word gets out that you have the highest quality hand crafted guitars for the best price. All of a sudden, there are people calling you from all over the place asking for your product. You start seeing dollar signs and start taking orders like their going out of style.
What you did not realize in your blind fury, is that you have no system in place to actually manufacture these guitars, package them, ship them and track them.In other words, you put the cart before the horse, and have no way to deliver on your promise, and your business implodes.
What I am trying to say, is you have to have a plan in place. Have a plan in case of rapid expansion, and have all the steps in place for a “what if” situation. Make sure you know what you will do if XYZ happens, and who will handle it.
I have a full team of people that handle all of the details of my business. This allows me to focus on teaching and training entrepreneurs.
Two: Diving into business without proper capital
Number two is starting off undercapitalized and then trying to keep up all the time.
This is a huge mistake and one that is easy to make. You just want to go out there and start getting new clients and customers, so you just take whatever money you have to get started. You assume that you will bring in enough money as your business grows to pay for all the bills that accrue, and when you start running out of money you panic, and start borrowing from anyone you can to stay afloat.
You must have a financial blueprint in place before you start your business or plan to expand.
Know how much money you are going to need in order for your business to survive for one year, and make sure you plan for expansion cost.
Three: Being a 1 trick pony
Mistake number three is only having one trick up your sleeve, or only being good at one thing, and not learning the other essential components of your business.
Say for instance you are good at accounting, you’re the bookkeeper guy or gal, and that’s all you want to focus on, because that’s what you enjoy.
We all tend to focus on the things that we enjoy most, and ignore the painful things about our business. Some people really hate selling, and so they just hope someone will find them and buy something. Or they are not that good at e-mail, so they don’t check it, and never get in touch with that customer that wanted to place a big order.
You have to spend time learning and applying all the areas of your business. You have to sell, because that is how you make money. You have to market, because that is how people find you, so you can sell to them.
Make sure that you are able to function in all the components of your business. Especially if you are just starting out, because as you grow and hire people to take on these positions, you are going to need to explain how you like your business to run.
Make sure that you are including ways to handle the things you are not good at in your business plan. You can either plan to hire someone to work side by side with you, or budget for some outsourcing.
Be balanced in all the components of your business.
Four: Not using your size as an advantage.
Not taking advantage of being a small business will stunt your growth.
When you are small, it is common to think that you have no way of competing with the giants in the industry. After all, you are just getting started and nobody knows who you are, so what advantage could you possibly have right? Wrong!
Sure, those big businesses have fancy websites, a huge marketing budget, and the ability to reach millions of people at the touch of a button. Their manufacturing costs are probably less than yours because of the amount of volume they produce, but they are giants, and we all know that giants can take big steps, but they are slow when it comes to the speed at which the steps is taken.
This is why being small can be so awesome if you know how to make it work for you. Being a small company allows you take action quickly.
If there is a new technology out there, you can implement it right away, and have it making money for you overnight. Where as a big corporation can take months to get something like that approved and put in place throughout the corporation.
So, basically, you are able to make changes quickly.
You are also able to outsource all of your work as it comes in, having a virtual team at your disposal. This can make you look like a bigger company than you actually are, and will allow you to take on more work as you get it.
This is something that I do with my business, and it is a major competitive advantage.
Just remember that you can be quick and make changes instantly. The big companies only wish they could move as fast as you could. So, take advantage of your ability.
Five: Forgetting to close the sale
I mention this before, but I will reiterate this point. You have to sell!! The reason you started your business is so that people will buy what you have to offer. If you think that the magic doors of profit will open up as soon as you hang a sign on your door, or that millions of people will come and find your website as soon as you install it, and you will never have to sell, you will be out of business very quickly.
Think about this. You had a vision when you started your company. You have something of value that you want to share with the world. People need to hear why what you have is better than what your competition is selling. They need you to sell them on your vision and your passion.
All your doing is allowing people to feel the same way you feel about your service or product, and that is all there is to selling.
You have to get good at that, if you are going to make any money.
Six: Forgetting about Cash Flow
We all know that if you are bringing in more money every month that you are spending, you are in a positive cash flow situation, but if you are in a business where you have to spend money now, in order to be paid later, you are in a negative cash flow situation.
Your goal is to maintain positive cash flow at all times, so that your business continues to move forward and grow.
If you are in a business that has to wait to get paid, just make sure you have enough capital to stay afloat at all times.
Don’t focus so much on how much you are profiting each month. You want to position your business so that there is a constant stream of cash coming in.
Seven: Locking yourself into bad contracts
This is probably the biggest mistake business owners make.
At first, they are just so excited to be in business, that they just start signing away without looking at the fine print, or really having any idea of what they are signing.
You need to make sure that you are thinking ahead to the future when you are setting up your business. If you are only looking one-step ahead, you will not be prepared when your business takes a huge leap.
So, when you are signing service contracts, and lease agreements for office space, and setting up merchant accounts and whatnot, you need to make sure that there is an exit clause in the contract that allows you to increase your productivity, move on to a larger space, or increase your monthly merchant allowance without huge penalties.
The last thing you want is to be stuck in an agreement that keeps you from expanding quickly.
Just make sure that whatever you are signing allows you to grow and expand for the future.