The Top 10 Pitfalls Every Business Owner Ignores

Even though business owners usually know what they need to do to establish or run their businesses, they can still face obstacles. That’s because knowing what to do is only half of a business owner’s job. The other half is avoiding troubles.

Here are ten pitfalls that nearly every business owner ignores at one time or another. Know them, and develop strategies to avoid being trapped by them, and everything will go better with your business.

1. Not Testing the Market

You may have a good idea. It may look outstanding on paper. But that doesn’t mean that the idea will be a moneymaker. This can happen with either the launch of a new business or a new product or service.

Before breaking ground with any product, service, or business, it’s mission critical to test the market before making a full launch. This may involve rolling out the product or service on a very limited basis. If that works, you can expand. And if it doesn’t, you can rework it.

2. Ignoring Customer Service on the Backend

A lot of business owners are very enthusiastic on the initial sale. But they’re not as excited to see the customer or client come back with a problem after the fact. That’s understandable, but as a business owner, you have to be prepared to be fully engaged on both ends of each transaction.

That means standing behind your product. If it’s deficient, you need to replace it. If there’s a problem or misunderstanding, you need to handle it gently. The sales job never ends when you’re in business for yourself. Often, the whole reason that a customer or client deals with a small business owner is because of that personal touch. Make sure that you are offering that at each stage of every business transaction.

3. Not Having an Ongoing Marketing Plan

Businesses often have comprehensive marketing plans when they first get started. But once they develop a cash flow, the marketing plan gets lost. Other functions become a priority, and there seems to be no time or money to put into marketing.

Marketing is the lifeblood of every business. Sure, you need to market heavily when you launch your business. But marketing should never end.

Some businesses get caught in a trap where they market until business gets heavy and then drop the ball. They only start marketing again when business falls off. But that’s a recipe for a cash flow that’s marked by peaks and valleys. The idea is always to even out your sales, and that takes ongoing marketing.

4. Underestimating Your Competition

Even if you think you have the best product or service on the market, never ignore your competition. Stay on top of what they are doing, both the good and the bad. The good especially, since you’ll need to adjust strategies and tactics – as well as your product line – to stay competitive.

5. Ignoring Constructive Criticism

It can be tough to take any criticism when you’re a business owner. But if any criticism even hints at improving your product, service, delivery, or any other link in your business chain, you need to pay close attention.

Often what seems like a personal attack could end up being your next innovation. As well, taking criticism graciously has a way of building customer relationships. It gives the customer a sense that they have a hand in your product or service, and that you want to meet their needs.

6. Not Reinvesting in Your Business

Naturally, the primary purpose of starting a business at all is to generate income for yourself. Just don’t get too carried away with that! Take as little salary as you can get by with, particularly in the early going of your venture. Then be sure to always reinvest some money back into your business.

It could be to expand your physical operations, to ramp up a marketing plan, or to improve your product or service. This must be done on an ongoing basis to ensure the long-term survival and prosperity of your business.

7. Not Getting the Right Professional Advice

There’s a lot of DIY going on these days, brought on by advances in the Internet. For example, many people do their income taxes, and small businesses may take advantage of accounting software to handle the bookkeeping.

But as a business, you almost certainly need an accountant or a CPA. That’s because businesses have more complex tax and financial situations than individuals typically do. Perhaps you can do your taxes online, but that might make it difficult for you to develop an ongoing relationship with an accountant.

The same goes for attorneys and any other professionals that you might need in your business, including business consultants and marketing professionals, if necessary.

8. Investing in Non-productive Assets

Some businesses, once established, begin to invest heavily in assets and appointments that are designed mainly to project the impression of success. While that might be necessary to some degree, you don’t want to get carried away with it.

Creating a winning environment or image is important, but never more important than your basic product or service. That’s the area that should get the bulk of additional capital.

9. Not Letting Go of the Reins

There’s no doubt that when you are first starting a business, you have to be ”chief cook and bottle washer.” But as your business grows, you’ll need to give up some of your responsibilities.

The first order of business is usually marketing and sales. That will almost certainly need to be the center of your primary concentration. All other functions should be gradually parceled out, either to employees or outside contract workers and services.

The idea is to free up your time to work in the areas of your business that will be most productive. Those will need to be those areas that bring revenue into the business. If you spend too much time on other functions, your sales will suffer.

A good book on this subject is The Power of Focus: What the World’s Greatest Achievers Know about the Secret of Financial Freedom and Success, by Jack Canfield and Mark Victor Hansen. It will explain exactly how important focus is to a business owner, and give you strategies to keep you on track.

10. Not Having Business Credit Lines Set Up in Advance

Many business owners ignore this step in the early years of their business. They delay gaining access to business credit until they have a specific need. But business financing is often a matter of advanced preparation. The basic idea is to have business credit lines set up before you need them.

This will give you the ability to react to changing circumstances more quickly, and with far less complication. For example, if you suddenly need to purchase more inventory or expand your business – or even to survive a dry spell – having a lending relationship established ahead of time will make it a seamless process.

For this reason, it’s important to develop a solid business banking relationship as soon as you are able, rather than waiting until the need arises.

If you are a new or established business owner, avoiding these ten pitfalls will have a direct effect on the profitability and sustainability of your business.

 

Monroe Bank & Trust does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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