Profit Traps in Your Business
by:
Megan Tough
It's common knowledge that most small businesses fail within 5 years. These statistics are mindblowingly depressing for people looking to start up a new venture. So what goes wrong? No-one starts out with the intention of creating something that isn't sustainable. In fact most people would be adamant that they weren't going to be one of those statistics.
Most business owners start out as technical expert in their field. For example - an engineer decides to start their own company after working for someone else for several years. He/she knows plenty about engineering, but not a lot about running a successful business. Most of us learn as we go, hence the high rate of business failure.
There are many things that can undermine a business. Here are a few:
Getting wedded to a single idea and sticking with it too long.
How long has it been since you updated your offer? That can be as simple as delivering your product or service in a new way. Those people who are married to the single, same idea for a along time will find themselves left behind in the marketplace. Remember, new ideas are the currency of entrepreneurs. Schedule time each quarter to brainstorm new ideas for your business. Keep it fresh and keep your customers interested.
Believing your own b.s.
Without wanting to burst your entrepreneurial bubble, sometimes we can believe so strongly in what we are doing that we ignore other (differing) opinions. There is a difference between following your instincts and going forwards with blinkers on. Generally, business owners are genetically wired to be optimistic. Just remember that an alternative view is also likely to be based on sound reason, and it's a great idea to understand what those reasons are.
Ignoring your cash position.
Why don't the customers take up your products/services more quickly - as you planned in the forecasts??? Welcome to the real world. It's often the case that business owners are overly optimistic about sales, particularly of a new offer. In the event that this happens, your reserves of cash will be your lifeline. Knowing exactly how much cash you need to run your business from week to week is step one in avoiding this trap. Step two is obviously having the cash you need, plus extra in reserve, to survive for 6 months with low or no sales. How does your business stack up on this one?
Letting unproductive employees linger.
You are a business owner right, not a Human Resources manager? Wrong. If you employ other people then one of your key activities is managing and coaching the performance of the people that work for you. If your employees:
a) want to do their jobs
b) know how to do their jobs, and
c) love working with you
then you are unlikely to ever have an issue. However, there will be times when your employees just aren't working out as you had hoped. Have you ever stopped to notice how draining it can be dealing with “staff” issues? But taking action is difficult and uncomfortable - so you let the situation drag on.
Don't get me wrong. I am the strongest supporter of ensuring that everything possible is done to provide employees with the tools they need to be successful. But when this process is exhausted, then it's time to take action. Check out what's legislatively required in your state/country and take the action you need to.
Selling too hard.
If you find yourself selling an idea or product too hard to too many people, perhaps it's time to listen to why they are not buying and learn from that, rather than trying to become a better salesperson. Do you have mechanisms in place that allow your customers to provide feedback? Do you ask your customers what else they want before you go and create something new?
Not setting up support structures.
Admitting that you need helping some areas is the responsible approach to business management. Hire people and services to handle the stuff that you're not good at, or don't have time for. Most entrepreneurs do better when they are fully supported, it's amazing the difference that taking the pressure off yourself can do for your energy levels and focus.
Running a successful business requires wearing many different hats - it's a very unique person that can wear each hat with the same level of skill. Acknowledging that we all have strengths and weaknesses is vital in a business environment. Recognising the impact of this and taking the appropriate action to support your “weaker” areas is the first step in creating a business to last the distance. Doing it all yourself is not a recipe for success.
About the Author:
Megan Tough is director of complete potential, a leadership and HR consultancy based in Sydney, Australia.
At complete potential we understand people - what engages them, what encourages them to perform, and what drives them away. With over 20 years experience working on HR issues in business, our job is to help you make the most of your investment in people. To learn more visit
www.completepotential.com
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