The world of business is cut-throat and unforgiving. A client and friend one day can turn into a competitor and enemy the next, and you’ll find that you’re constantly fighting battles, internally and externally in order to keep the ship steady and sailing in the right direction. Given the fact that so many businesses make basic and costly errors in their first handful of years of operation, this guide is aimed at raising awareness. If you’re aware of the key errors businesses make, you’ll be better placed to avoid these common and costly pitfalls.
Poor Financial Planning
Right up there with the most common business errors is poor financial planning. There are several ways in which poor financial forecasting, saving and cashflow maintenance can upend a business. It can leave you without enough cash to effectively pay your workers, your bills, and your other financial commitments. It can also simply mean that you have no money to run your company, leaving you with no option but to slip into debt or declare bankruptcy.
If you think you and your business partners are sensible enough to avoid serious financial planning issues, you should think again. Some of the world’s biggest and best-regarded firms have fallen foul of poor financial planning, misleading accounting, and general mismanagement. The only way to properly avoid this common business error is to hire honest, expert financial workers who will help you make sense of your accounts so that you’re never looking down the barrel of bankruptcy later in your business’ life.
If you’re not covered by insurance, your business is vulnerable to a number of different risks. Let’s take a handful of clear examples when an insurance policy could end up saving your company heaps upon heaps of cash:
- In the event of a natural disaster such as a flood, insurance will cover you for the damage you sustained
- If you’re being taken to court by an individual or a company, an insurance policy may well protect you from the worst of the financial impact of those court proceedings
- If your business loses earnings due to the mismanagement of another firm, you’ll be able to seek insurance payouts for that loss of earnings
Whatever your concern, you can get your business covered by insurance that suits your risk profile, simply by searching online. It’s a simple process that requires a little input from you, but it could end up saving your business money – or even saving your business from liquidation and bankruptcy.
As a business leader, you’re always motivated to have your workers producing the best possible work in the least possible amount of time. This motivation is a good one, but the way it is sometimes articulated is often less than healthy or helpful. The bug bear of many employees is the so-called micromanagement that may senior managers take upon themselves in order to deliver excellence in all areas of their business.
There are several problems with this approach. It leaves your staff with little autonomy and with little room to learn and grow. It leaves you worn out and stressed, which could lead to burnout. Micromanagement may also well be counterproductive in a productivity sense – leaving you with less time to handle the big calls because you’re so tied up with the smaller ones. Try not to micromanage – instead let your teams operate freely without interference. This will help you make the most of your human resources and avoid hindering delays.
It’s clear that several sectors are growing rapidly worldwide. Many of them are connected in some way to the digital marketplace, be they apps, e-commerce sites or software programs. If you have a business in one of these areas (and you’re keen to scale fast), it might be worth examining a number of the cautionary tales on this subject that have emerged in recent years – from the rise and fall of WeWork to the demise of several other digital-first companies.
While the CEOs are doubtless responsible for these high-profile crashes, it’s important to note that in each example of a business growing and then failing, the growth was simply unsustainable. In all these cases, it would have been more prudent to scale slowly while keeping an eye on your company’s capacity to deliver to more and more customers. Don’t be over-ambitious when you’re scaling – ensure that every time you grow, you have the personnel and the procedures to support that growth.
If you’re thinking of setting up a business, you should always think first of the market that you’ll be operating within. You’ll do market research in order to understand the scale of the market so that you can approach investors with a reasonable pitch. You’ll also research competitors and find ways that your new company will be able to outperform them, offering more value to customers. Still, if you’ve done all this research, you may still fail to penetrate the market that you’re targeting.
Why do so many companies fail to penetrate their given markets? Well, there are plenty of answers – from poor sales and marketing strategies to a poor value proposition that consumers simply don’t take seriously. Many businesses fail because they simply don’t attract the critical mass of customers to begin profiting. So as well as conducting market research, you should meticulously plan how you’re going to penetrate your market effectively in the coming months.
It might sound like a cliche, but new businesses lean heavily on their staff in order to make ends meet, to grow their firm, and to create a culture and a values system that everyone can jump on board with. If you fail to manage your staff well, you may inherit a disunited and demotivated team that simply won’t deliver results. From hiring and firing to training and mentoring, make sure you’re taking your human resources seriously in order to give your firm the best shot at success this year.
There you have it: six key business errors and how you can avoid them in the months to come.