8 BIG Small Business Mistakes
Here’s an interesting concept: Do you realize that there are mistakes you can make at different stages of the business development process that can slowly kill it over months or years? even years if you don’t watch out for them?
Well, these mistakes still exist and they’re not just for newbies. Many active businesses, including those that you might consider “successful” because they’ve been around for 10 years, often keep doing them…and can lose a lot of money and / or waste a lot of time in the process.
While some of these gross and surreptitious mistakes seem to be aimed more at service businesses, they are actually suitable for almost any type of industry. I’ve done my best with the lists below to come up with examples that prove it.
Undervalued Project/Service Time — This is a big deal and it affects businesses that do service businesses as well as businesses that sell a product. It was the bread and butter of a service business. If you don’t estimate your time to make each serve in your repertoire, you’ll burn out and can’t do much other than bite the bullet and gain experience.
The best way to estimate time is to do it yourself, or watch your best employee perform the task, and then add a little element of error to it. For product companies, time becomes a logistical issue, so take note!
Company Number Unknown / Incorrect Valuation — Note I have emphasized the word “yours”. It is a common mistake to use competitors as a price indicator without really knowing why they are using those numbers. Think of the nightmare you would have if you took your competitor’s price, took 10% off, and then started selling.
What if the competitor has a bad pricing structure and barely makes any money or even loses?!?! What if your costs are higher than theirs?!?! You can use your competition as a starting point, but you can’t base your entire strategy on it.
Different industries have their own variables when it comes to costs and you need to know this when pricing your project or product. What you pay for a product you will sell is not the only cost to keep in mind when pricing a product.
Your labor and material costs for a service are only part of the hourly rate. Employees cost more than just wages, and not all employees are part of your labor costs. Every business has payable insurance. There are many necessary expenses that should be part of your price.
By the way, the big factor that many people overlook in their pricing is the quality factor. What you include like “standard service” or “standard product features,” as well as an onsite card or in-store service or warranty should all go into your price. I will learn more about why in the next segment.
Don’t Charge For All Your Time and Expense — This may seem like a silly statement to some, but I bet most business owners will admit that they have provided too much for the farm. Hey, there’s nothing wrong with giving a little extra here and there to show you care.
But anyway, that’s not what I’m talking about here. What worries me are people who put too much quality into their work or their product or their store and don’t cover the cost. For example, let’s say you run a service business and your competitors don’t offer a certain standard service that you provide.
You can’t just lower their prices to steal a job; you must include this cost in your fare and advertise the fact that it comes with the fare in advance. Stores devalue themselves, for example, when they put a lot of people on the floor to serve customers but don’t charge a fee.
These things cost you money, and when your competitors don’t do them, they cost less. Offer better service, then price them lower, and your competitors just have to wait a while for you to fall on your face for them to come back.
valuable goods. If you have the opportunity to explain why your price is higher, take this opportunity and do it. If they don’t like the fact that you include things that others later charge or treat them better, chances are they’re a price buyer. You don’t want them to be regular customers anyway. Trust me.
Not getting paid fast enough — Yes, old cash flow problem. As long as you make enough money to pay the bills, this problem can be solved, avoided, or at least as less severe as possible. Here’s the deal:
First, bill your customers fast. It’s very common for a small business to not have the necessary procedures or systems to generate and send invoices in a timely manner (see next section for more). Again, that seems unlikely because that’s why we do the job — to get paid. But the people responsible for passing this information on to the people responsible for payment are very easy because they are too busy to get it or don’t have enough organization to provide them properly.
The second part of slowing or stopping a steady cash flow crisis is arranging payments as quickly as possible with customers and as slow as possible with suppliers and employees. If there is a way to not pay employees more