Here’s an interesting notion: Do you realize that there are mistakes you can make at various stages of your business’ growth that can be slowly killing it for months or even years if you don’t watch for them?
Well, these mistakes do exist and they are not just reserved for the rookie companies. Many working businesses, including those you might think, are “successful” because they’ve been around for 10+ years, are often still making them… and are possibly losing a lot of money and wasting a lot of time in the process.
Although some of these big and sneaky mistakes seem aimed more at service type companies, they really do fit the bill for almost any type of industry.
1.) Underestimating Your Project and Service Time
This is a big one and it pertains to service companies as well as companies that sell a product. This is a service company’s bread and butter. If you don’t estimate your time to perform each and every service in your repertoire, you will get burned and there is little you can do about it but bite the bullet and learn from it. The best way to estimate time is to do it once yourself or watch your best employee do the task and then throw in a little fudge factor on top of it. For product companies, time becomes an issue with logistics so be aware!
2.) Not Knowing Your Company Numbers and Incorrectly Setting Prices
Notice I emphasized the word “your.” It’s a common mistake to use a competitor's pricing as your pricing gauge without actually knowing why they use those numbers. Think about the nightmare you will get yourself into if you take a competitor’s price, cut it by 10% and then start selling. What if the competition has a bad pricing structure and is barely making money or even losing money? What if your costs are more than theirs? You can use competitors as a starting point, and you can’t base your whole strategy on it, base it on your research instead.
3.) Not Charging for All of Your Time & Costs
This seems like a silly statement to some, and I bet most business owners will admit they have given away too much of the farm at times. There is nothing wrong with giving a little extra here and there to show you care. Either way, that’s not what I’m talking about here. What concerns me are those who put a lot of quality into their work or products or stores and do not cover the cost for it.
As an example, say you run a service company and your competitors don’t do a certain standard service that you do. You can’t just undercut their price to steal a job; you need to have that cost covered in your rate and advertise the fact that it comes with the price upfront. Stores undermine themselves, for example, when they put more people on the floor for customer service but don’t charge for it. These things cost you money and when your competitors don’t do them it costs them less money.
4.) Not Getting Paid Fast Enough
That’s right, the old cash flow issue. As long as you are actually making enough money to pay the bills, this problem can be solved, prevented, or at least made to be not as bad as it could be. Here’s the deal:
Bill customers promptly. It is very common for a small business to not have the procedures or systems in place to get invoices generated and out the door in a timely fashion. Again, this would seem unlikely since that’s the reason why we are doing the work- to get paid. But it is very easy for the people responsible for getting this info to the billing people to be too busy to get it there or not have enough organization to give it to them the right way.
The second part to slowing down or stopping a regular cash flow is to make the quickest payment deals possible with customers and the slowest possible with vendors and employees. If there is any way not to pay employees any more than twice a month, you better do it. Negotiation longer payment terms with vendors goes a long way in increasing your cash on hand.
Stay tuned next week for Part 2 of 8 BIG Small Business mistakes.
Carmen Ventrucci’s motto is Follow Your Road. She knows small business owners create their business so they can make an impact for their clients, community, family, and life.
Nicknamed by her clients as ‘The Girl with the Golden Shovel’' due to results, Carmen helps her clients scale and grow their business so they can magnify their impact. Carmen is a small business consultant based in St. Paul, MN and serves clients across the USA with her company, True SISU Life, LLC.