Content provided by a guest contributor.
An increasing number of entrepreneurs are entering the challenging new world of running one’s own business. Below, Pearl Seigel addresses 10 common pitfalls that start-up businesses often face. In doing so, she also provides ways to avoid said pitfalls.
1. Lack of planning
Businesses that do not have a plan often lack direction and focus. The purpose of developing a business plan is not just to raise capital, but to direct the process of starting a new business. That said it is always important to change the plan as the business grows.
2. Not using business cards to promote the business
Many start-up businesses think that the cost of business cards is a waste of money. A well designed business card with readable information is an inexpensive way of ensuring your business is remembered and easily contactable.
3. Not understanding the 80:20 rule
This rule is often misunderstood. When 80% of sales come from 20% of customers you may decide to spend all your time on those customers. It is important to understand that those customers have strong bargaining power and although the sales turnover may be high the profitability is often low. Also, if you lose those customers you lose 80% of your business!
4. Undercharging for products or services
Some start-up businesses undercharge because they do not know how to work with mark-ups that take into account operating costs. For example if you buy a product for R10 and sell it for R20 that is a R10 profit. Sounds great, but what about the other costs of doing business - these could be transport, salaries and electricity.
5. Extending credit
Start-up businesses that extend credit may end up with a lot of bad debts. If customers do pay, waiting 60 to 120 days can threaten sustainability.
6. Acting as if you are a big business
It may be tempting to act as if you are a long established big business. Suppliers and customers are not easily fooled and will view you as dishonest. Remember all big businesses start of as small businesses. Microsoft did not start as Makrosoft!
7. Bad customer service
Customers will always be drawn to efficient effective service. A happy customer will become a loyal customer. They will tell their friends and word of mouth marketing or referrals are one of the best ways to grow a business.
8. Letting emotions influence decision making
Decisions based on emotions without thought or analysis can be financially detrimental. For example a pushy salesman wants you to buy an expensive item or to sign a two year service contract. It’s best to take the information and say you need time to think about it.
9. Financing growth
Growth is a good indication that there is a demand for your product or service. But can you finance the growth? Growing costs may include needing more people or machinery.
10. Lack of motivation
Entrepreneurship requires the ability to stay motivated. Persistence, perseverance and patience are key ingredients to claim a share of the market. The ability to keep going both financially and personally is often a problem. Speaking to other entrepreneurs or a mentor can keep you motivated.
The content in this article was provided by Pearl Seigel (MBA) – Author of 7 Tried and Tested Triangles. As a Communications Specialist, Ghostwriter, and Author of Business & Nonfiction Books, Pearl's expertise lies in training, branding, coaching, communication, e-commerce, entrepreneurship, and strategic marketing.
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Tel: 074 187 5137