Running a business is a difficult task. Small business owners are prone to make an array of errors. The majority of them believe that putting all of their money into a small business and working hard is the key to success. But gone are the days when putting in long hours was the only way to succeed in business. Business owners are now expected to work not only harder but also smarter.
So we have listed down some of common mistakes of committed by small business owners, that are easily avoidable :
- Bypassing the Planning stage : You'll be operating in the dark if you don't have a sound plan for your firm that incorporates business idea research and market potential. A business plan, a finance plan, and a marketing strategy are the most crucial plans to consider.
- Believing you have no direct competitors: The euphoria surrounding a new product or business might lead new entrepreneurs to believe that they have no direct competitors or that their product is so far ahead of the competition that it belongs in its own category. In actuality, having no direct competition is incredibly rare.
- Treating marketing as an expense vs. an investment : An expense is something you buy and depreciate. An investment is something you purchase that will deliver value in the future. The sole purpose of marketing is to drive more leads into customers and keep them as raving fans. So if you run your small business looking at marketing as an expense to be cut when things get tight, you may want to reshape your perspective on small business marketing.
Digital marketing (through use of social media) aids in the development of an active lead pipeline, with a portion of those leads eventually converting to customers and clients
4. Marketing without USP : Your unique selling proposition (USP) is the single statement that distinguishes you from the competitors. It demonstrates how your product's benefits directly address consumer needs in a way that no other product does.
Are you solving a problem no one else is solving? Creating luxury quality for a low price? Are you selling a specific lifestyle? Do you use materials or resources in a new and desirable way? Customers have a lot of marketing messages clamoring for their attention. If you don't present them with a USP, your business is likely to get lost in the noise.
- Failing to keep Books of Accounts : Even small business owners, self-employed people, and freelancers should establish formal, recorded, and precise protocols for handling bookkeeping and accounting procedures, as well as other routine chores. For instance, have simple formal process in place for acquiring raw materials from vendors.
- Mixing Business and Personal Funds : Mixing personal and business funds, whether you're opening a new firm or running an existing one, is a prescription for disaster. If you're the sole proprietor and buy business goods with your personal credit card or pay for personal purchases with a business check, you'll find it tough to keep track of how much money the company is making or losing.
- No Control over inventory : Inventory management is critical for all parts of a business. If you don't have adequate stock, you risk losing money when there is demand. Having too much, on the other hand, can be detrimental in a variety of ways, as it adds to your costs. You risk these additional costs and other areas of inefficiency if you don't have an inventory management system.
- Having insufficient margins : Maintaining a good profit margin is crucial to your success. Setting it too low today can make it infinitely more difficult for you later on, and your consumers will most likely be unhappy when you need to raise your rates. Examine your manufacturing and recurring costs to see how much room for flexibility you have to accommodate healthy margins.
- Not Taking Out a Business Loan at the Appropriate Time : Working Capital is critical for a company's survival and growth. When cash flow starts to dwindle, a slew of problems might occur. Many debts may go unpaid, resulting in a negative credit score or putting a strain on the business owner's finances. For this and other reasons, knowing when to take out a working capital loan for a business is crucial. Not availing it on time is certainly one of the biggest small business mistakes.
- Not paying attention to your credit score : A credit or CIBIL score is the most significant factor to consider when applying for a business loan. It establishes whether or not the business owner is a qualified borrower. For starters, credit history has an impact on financing choices such as supplier or vendor credit. This arrangement aids in the smoothing out of periods of low cash flow. A good credit score might also lead to a cheap interest rate.
About Author :
Sreejith is a Chartered Accountant by profession and a Partner, CAPITAIRE Consultants LLP. He has more than 19 years in advising MNC clients and medium Indian groups on assignments involving tax planning, inbound investment, and entry strategies, entity and business structuring, capital structuring, restructuring of cross border operations, transfer pricing, etc.