The 10 biggest mistakes business owners make
Common business mistakes
We’re often told that making mistakes is a good way to learn – and there’s a lot of truth in that. Our careers, relationships and choices are littered with slip-ups, from which we pick ourselves up, learn a lesson and move on.
But when it comes to running a business, making mistakes can cost more than a dent to our self-esteem. When you have money on the line – not to mention jobs – mistakes can lead to disaster. So sometimes it’s best to avoid common mistakes business owners make by being aware of the potential pitfalls first and preparing for them.
Here, we introduce some of the errors that are most often made, and outline a few ways to avoid business failure because of them.
Underselling your product or service
One of the biggest small business mistakes to avoid is not undertaking the necessary market research to establish a competitive price for their product or service. Whether it’s branching out into a new range or pricing up packaged services, many struggle because they’ve set the value of their offering too low.
Price is important to get right and to assume that going low will bring customers in is erroneous. Research the demand for any new product lines or services, develop USPs for them and price accordingly.
Failing to manage cash flow effectively
A big threat to businesses is insolvency, and many fail not because they are unprofitable, but because they can’t pay due debts on time. If your business is pursuing investment opportunities, be aware of what money is going out and when, versus what is coming in, as significant outlays can be necessary before the benefits are felt within the company’s finances.
Those looking to expand should make a detailed business plan, part of which should outline the expected and confirmed costs, when they are due, and when cash or credited income can be expected.
Being unrealistic about the competition
You may think that your product or service is the only one of its kind on the market, but there are always other businesses out there competing for consumer attention and investment on products to meet similar needs.
Undertaking extensive competitor research will not only increase your awareness of who and what is out there, but will also help you to identify any techniques or messages being used that you can challenge or borrow from. Look to regularly assess the competition and broaden the definition of your market to stay aware of changes and developments.
Leaving tax paperwork to the last minute
Another of the common mistakes business owners make is to leave the tax paperwork to the end of the financial year. This will only cause headaches when the time comes for tax return submission.
Completing and storing financial records as well as paying taxes such as Payroll and Super tax in increments will help you keep on top of taxation throughout the year, rather than sitting down to a stressful meeting to cover everything with your accountant in one hit.
Not respecting customers
There was once a time when the sales people were the experts on their products and the market. This is no longer the case. With access to a wide range of information at the touch of a button, many consumers walk into a purchase knowing exactly what they expect from a product and what is offered by the competition.
It’s vital for businesses to know this when interacting with customers and acknowledging the research they’ve done themselves. Customer service is not about successfully selling a product but also going above and beyond: listening to their opinions, respecting their decisions, ensuring their experience is as good after the sale as it was at the point of sale.
Hiring the wrong people
When running a business, particularly if it’s fairly new, it can be tempting to hire friends or past colleagues rather than diligently searching for the right people to support you.
Intelligent, capable staff with skillsets to complement yours are essential to make your business successful, so instead of surrounding yourself with friends, take the time to assess what you need and employ people who can deliver. This may take longer and prove a little more expensive, but it’ll pay in the long run.
Running a business based on gut instinct and what you think your audience wants probably won’t get you into the realms of success. Ignoring data can be a sure-fire route to failure if it’s contradicting your personal notions of how to proceed.
Make a point of regularly surveying customers, studying potential consumers, and analysing the metrics to determine what is and isn’t working. By delving into the evidence, you can make smarter decisions and potentially save yourself a lot of money.
Growing too quickly
It’s a mistake that established businesses can make as easily as start-ups. You’re experiencing demand, you’re keen to take the next step, but when you expand you find the demand dries up or you can’t offer the same quality, either in your product or your customer service.
Growing too quickly can trigger such issues, so ensure you pace growth appropriately even if it takes twice as long. Take time to plan, invest at a rate you can sustain, and determine how you’ll maintain the quality of your delivery before embarking on growth.
When there are only a few people in the business, it can be easy to take charge but, as you grow, the decisions often become tougher. When it comes to common mistakes business owners make, shying away from responsibility is a top one.
Your company needs someone to take charge, make the difficult decisions, and be accountable for any consequences. If you feel you need it, take some leadership training to help you step up with confidence.
Doing your own accounting
Accounting software is making it increasingly tempting for business owners to try and handle the accounts and finances in house. This can lead to mistakes being made on tax returns or with costs – mistakes that are easily avoidable.
Instead of taking on accounting duties yourself or handing them to an inexperienced member of staff, employ an accountant to look at your figures regularly, help with tax returns, and suggest ways to improve your financial situation. It’ll reduce hassle as well as the chance of errors occurring.
THP Chartered Accountants offers a range of services from tax accounting and planning to auditing and legal services. Contact our offices in Wanstead, Cheam, Chelmsford, Saffron-Walden and London City today to find out more.