When the economy is slow, it's more important than ever to take a long, hard look at what you're doing in your business. To lend a hand, Barcelona business coach Edward Hamilton gives us a roundup of the most common mistakes that business owners make and which can have a profoundly negative effect on their business.
Are you making any of them? The first step is to admit if you are making one, then start taking action to rectify it so you can improve the situation in your business.
1) A lack of planning
You probably all have business goals, but do you have the detailed plan to reach those goals? When you have a vision and a plan, you can check it regularly and ask yourself “Is what we are doing supporting our plan and our goals?”. Plan out at least six months ahead— include for example what products you’ll introduce, what marketing you’ll do, how much money you intend to bring in, etc. If you fail to plan, you plan to fail.
2) Not measuring your business operations
You can only manage what you measure. If you don't know what is happening in your business, it is very difficult to pinpoint the areas to improve. You'll be unaware that certain areas of your business need attention or have great possibilities. Measuring key performance indicators will give you the information you need to make improvements to your business. Being left in the dark could be costing you money or lost potential.
3) Assuming you have no competition
Even if you have the latest, greatest, never-been-done-before approach to something, don't assume that you have no competition. Competition is more than just the direct, obvious competitors. Competition is also all the available alternatives. What else could the consumer do instead of using your product or service? Could they do nothing? The customer almost always has the option of walking away. That alone is a serious competitive threat.
4) Not Knowing Your Audience
Understanding the consumer base that you’re trying to appeal to is a key pillar of success. Simply having a product or service isn’t enough. Whether you’re selling shoes or business-to-business you have to know who your target audience is and what they’re interested in.
5) Being a weak leader
The success of your company is contingent on being an effective leader to help your employees achieve their potential in the business. This does not mean you need to be an authoritarian, but you also shouldn't be everyone's buddy. A great leader sets the course for the company, communicates it constantly, and inspires the team to get to the next level. Without an effective team it is difficult to hit your business objectives and without good leadership it is difficult to have an effective team.
6) Ignoring your online presence
Like every part of your business, if you ignore it, it’s not going to help you and it will seldom get you any sales or leads. Nowadays so much of the buying decision is made before the customer even makes contact that your online presence has become more important than ever. Small businesses need to interact with consumers, offer a portal to receive information, add regular content via social media channels, build links and use the web as a successful tool for lead generation. If you are not receiving leads via your website then you are probably doing something wrong.
7) Cutting Prices
Often, the first thing business owners resort to when business is tough is to try differentiating on price. Cheaper prices mean more customers, right? Well, not always! Most customers are willing to buy more expensive items because of the greater quality or the added convenience. During tough economic times, an increase in price, coupled with improvements in quality or convenience, can improve sales better than price cuts. Price slashing is a dangerous game, which could lead to slashing employees or salaries to keep costs down.
8) Not marketing
One of the first expenses that gets slashed during tough times is the advertising/marketing budget. You need to be very careful in this area. It is the marketing that drives the revenue in many companies. Instead, what you should be doing is measuring the effectiveness of your marketing and making sure that you are investing in the right marketing vehicle to reach your target market. At a minimum you should have a simple marketing plan, a marketing budget and a way to measure the effectiveness. Expecting that your market will find you is a quick path towards going out of business.
9) Poor cash flow management
Business owners often confuse profit with cash flow. As the old saying goes, "profit is what you pay taxes on, but cash is what you put in the bank." It is important to understand how cash cycles through your business and the "holes" it can get stuck in. Every business owner should be managing their receivables, inventory and payables. In other words, when it comes to cash, timing is everything.
10) Trying to do It all
A great mistake is to believe you can do it all by yourself. Just like any other person, you have your natural talents and other areas where you are not so strong. As a business owner, it is your job to identify those talents and focus on them to your fullest. Surround yourself with people who are strong in the areas that you are weakest. This can be done in two ways: i) outsourcing to specific service providers or ii) employing and delegating effectively. Both are effective and you may need to use a mix of both techniques. Taking on an extra pair of hands will increase your costs but you will be surprised at how much time will be saved, allowing you to do what you do best.
11) Forgetting why you're doing this
Sometimes, in the stress and struggle of running a business, you forget why you started it in the first place. You forget that you were looking for an opportunity to control your time and own your destiny. But you must hold on to those dreams and pursue them passionately. Because a common thread I've seen running through the lives of successful people is that they have a reason for doing what they do—a personal and powerful reason that pushes them to be successful.
Fortunately, all these mistakes can be easily solved if you decide to focus on them. So the first step is to admit if you are making one, then start taking action to rectify it so you can experience the improvement in your business. What other mistakes do you think business owners often make?
Edward Hamilton is a Barcelona business coach working with small and medium sized local businesses.