Avoid These Business Mistakes
Even successful businesses frequently make mistakes that can ruin them over time. Making the same mistakes over and over can kill a business slowly — even businesses have been around for more than 10 years are still making them and probably losing a lot of money in the process.
Mistakes can be made in all stages of businesses growth and are often perpetuated simply because there is no time set aside for evaluating, planning and monitoring. One of the best things you can do is to have a set of goals and a business action plan that is reviewed weekly or monthly without fail. By constantly monitoring how you are doing you ensure that you stay on the right path to success and avoid the following mistakes:
If you don’t accurately estimate the time it takes to deliver a service or complete a project, it can cost you a lot of money. Add in some contingency time and start over estimating how long something will take to achieve. For example, if you have estimated an employee can complete a task in six hours, but it takes him two days, then you are paying way over the odds and reducing your company’s profitability — over time this can have serious consequences if you consistently underestimate your timing.
It’s a common mistake with small businesses to undercut their competitors’ prices but all that happens is you end up with a price war where nobody wins. Before you undercut your competitor in future, consider whether their pricing structure is sound — how do you know they are making money at this price — what if they are actually losing money? Do you know what their costs are? They may be able to afford a low price because they are sourcing their products more efficiently and cheaply, so don’t automatically assume that if you’re competitors are charging less that you can do the same and still make money. Do your sums carefully and consider more than just the price. Consider offering better quality at a reasonable price — you may sell fewer, but each item will have a higher profit margin, so you may not be any worse off and unless you’re product is identical to your competitors, it may be preferred by your customers as a product or service with a higher perceived worth.
Another mistake small businesses make with pricing is to give away lots of extras and there is nothing wrong with giving away a little bit extra here and there to show your customers you care — the thing you have to remember is to cover your costs or you will end up losing money. Consider that when you charge a fair price for something, your customers will believe they are getting something worthwhile that deserves to be paid for. You can do without customers who are constantly looking for bargain — concentrate on people who are willing to pay for good service and quality products.
Not getting paid quick enough
It’s the old issue of cash flow and businesses that fail to bill customers promptly or chase their invoices end up out-of-pocket when they have their own bills to pay and not enough money to pay them. It’s important to develop a system and bill your customers promptly — if at all possible deal with products where a customer pays up front and this will eliminate the problem altogether.