5 Fatal Mistakes to Avoid in Preventing Business Failure4:27 AM
This is the most fatal error that an entrepreneur could make. Many millennials become entrepreneurs ...
This is the most fatal error that an entrepreneur could make. Many millennials become entrepreneurs without knowing the fundamentals of starting a business can result in some costly, if not fatal errors. Having a business that fail can be devastating. Unfortunately, it
happens all too often. In fact, according to the Small Business
Administration, 8 out of 10 businesses fail within the first five years.
To survive, a new business owner should avoid the following 5 fatal mistakes:
The worst mistake an entrepreneur can make is to launch a business without a plan. I have seen it happen time and time again. As a result, many small business dreams fail or fall short of their actual potential. DON’T DO IT!
What exactly is this thing called a business plan? In a general sense, a business plan is simply taking your dream and turning it into reality. It is a document that you create when you take an idea and work through all the factors that will have an impact on the successful startup, operation, and management of your business.
Also read: The Top 10 Branding Mistakes Entrepreneurs Make
A business plan defines your business, identifies your goals, and serves as your company’s blue print or resume. Smart entrepreneurs plan because they understand that it increases their chances for success.
In essence, a well thought out business plan is going to:
- Force you to examine the feasibility of your business idea and examine all relevant factors.
- Provide you with a detailed road map to success as you make your new venture grow.
- Aid you in monitoring vital business activities better; identifying and analyzing many factors, both internal and external, that might affect your overall operations.
- Convince investors that you are worthy of their time and consideration. All potential financial sources will want to see a plan that includes how you will start-up and grow your business.
FATAL MISTAKE #2: No Marketing PlanWhy is a marketing plan important? In order to have a successful company, an entrepreneur must have a game plan in attracting and retaining a growing base of clients.
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Marketing is your blueprint or written document for implementing and controlling your company’s marketing activities. It allows you to plan out and create the kind of attention you need to come into contact with the right types of people or companies that is important to your business success. It is imperative that you plan your marketing strategies and find a means to measure your performance in order to sustain your market presence.
Also read: How To Start A Business: The 8 Steps To Startup
Here are 5 cheap marketing ideas:
- Incorporate social media into your marketing campaign. Using FREE social networks such as Facebook Twitter, LinkedIn or Pinterest can increase your visibility, grow your company’s brand, establish you as an expert and resource and create buzz on a global basis!
- Create a professional one-page flyer with ten professional tips based on your expertise. This can be distributed at networking events or distributed in places where your clients might be.
- Create several topics that you could speak about at seminars, as a presentation at a potential client’s office, at professional or civic organizations.
- Send out news worthy PR pieces. Your local newspapers or magazines will publish information for their readers’ benefit. When you contact the local media about your business, you must look beyond the daily operations of your company and find newsworthy information to the media’s audience.
- Establish a database of potential clients. This can be done by using software such as ACT or File Maker. Send out mailings regularly about your company’s promotions, newsletters or just because. This can be done through mail-outs, emailing or faxing. The point is that you need to be in their face so that when they need your services, they will call you.
FATAL MISTAKE #3: Ignoring Your Financial PositionLike many of us, we thought we planned it all out. We launched the company and the clients are knocking at our door. As much as we would like for this to happen, this is not the real world. Customers are not going to buy your product or service just because you are in business; they are going to seek you out when they need you. So, you must mentally and financially prepare yourself for the slow period of your business. Otherwise, if you poorly plan, you can create an unnecessary financial crisis.
Also read: 10 Daily Habits of Successful Entrepreneurs
A few financial tips:
- Create a budget and a measurement process to keep track of how you are doing monthly. If you don’t know where you stand financially and have neither short nor long term financial goals, then you are just letting fate dictate your success and we know those odds aren’t too good. Control your own destiny!
- Forecast your cash flow. By simply looking at your next 3 months projected income or revenue and your expenditures, this will enable you to forecast what you need to keep the business running. The difference is your cash flow. By taking a little time and creating this on a simple spreadsheet, you can avoid surprises.
- Preplan cash flow issues by prearranging a line of credit at your bank. This will give you a piece of mind if you get into a crunch, at a time when you need it!
- Factor your receivables for quick cash? These are financial service businesses that will pay you for your receivables. This service works by providing a cash advance based on the total value of the invoices that you provide as collateral. Typically, you can receive 75 to 80 percent of the invoice value upfront. Once the invoice is received, then you receive the remaining value of the invoice less a factoring fee. This is especially helpful for clients who may not pay you in a timely manner.
FATAL MISTAKE #4: Poor Relationship with Your CustomersRecommended: 10 Brutal Marketing Mistakes That Hurts Every Entrepreneurs
Do you know your customers preferences and spending habits? Can you predict their buying patterns; what they want now and will likely want in the future? Are you regularly scoping out changes in your competitors’ products and / or services or checking out what they are doing to grow their client base? Listen up, if you are not in your customers face, then your competitor will be. In fact, your competitor might be growing their business by gaining your customer as you read this article.
Also read: 10 Biggest Mistakes New Entrepreneurs Make That Must Be Avoided
A few tips to keep your customers loyal:
- Listen to your customer: Let them tell you what their needs are and then respond appropriately. As the expert, they are looking at you to fulfill their need.
- Take care of complaints immediately: of course, nobody likes complaints, but if you take quick action in resolving your customer’s complaint, you may have a customer for life and position your company to reap the benefits of good customer service.
- Over deliver and under promise: the worst thing that you can do is to make promises that you can’t keep. Not only are you putting your reputation at stake, you are also disappointing a customer who might eventually lose confidence in you and take his / her business to a competitor.
FATAL MISTAKE #5: Inadequate Employee RelationsOne of the most difficult tasks of running any business is the art of hiring and retaining good employees. When you become an employer, you have the daunting task of motivating, coaching and managing your staff.
What does it take? Employees want a good working environment, a fair salary, a sense of accomplishment, a belief in the quality of the company and perks.
Also read: 10 Financial Tips for Startup Entrepreneurs
Inexpensive Ways to Retain Quality Employees:
- Communication is key: Keep your employees informed about what is going on with the company.
- Improve benefits: Develop a compensation program. There are plans that will cost you little or no money. By doing this, you are sending a message that you care which could lead to increased loyalty and reduced turnover.
- Create a team atmosphere: Provide a reward and recognition programs that recognize performance and achievement; sponsor regular company social outings to build rapport; make a big fuss about accomplishments.