You’ve got your small startup off the ground, and it is now running well day to day with significant turnover and even a healthy salary. You have a great group of employees who are dedicated to your organization and want to make your profits soar. But this is a risky time for any business. Make the wrong move, and instead of becoming an industry leader, your business could take a nosedive and collapse around you.
That might sound like a worst-case scenario, but according to the Bureau of Labor Statistics, one in five businesses fail within a year. But a little bit of knowledge can be a powerful thing in business.
Here are a few common mistakes that can cause a company to go bankrupt. If your leadership can steer your business to avoid these pitfalls, then you may even see steady growth for years to come:
If your business is doing well and you are getting repeat customers, it is tough to say no. You want to make as much money as possible, and that means more products or more services provided, especially if you are a people pleaser. But you have to be very careful because overcommitting can make your business plummet.
A business that says “I’m sorry we are sold out” or “we are too busy” may lose the odd customer but a company that promises and fails to deliver will lose countless more because you are letting someone down and failing to deliver what you promised.
Trust is a massive currency with your clients. If you let them down, they will not come back to you, and they may even turn off friends and family with bad reviews. If you disappoint them, they may even publicly review your service online. Those bad reviews don’t disappear and won’t be forgotten easily. Of course, they won’t sink your business alone and can be dealt with but not if they start to pile up. Be aware of your capacity and let customers know that while you may be too busy or out of stock just now, you appreciate their business and would love to give them a small discount or add them to a waiting list.
Having an understanding of your limits will turn your weakness into a strength as you use your businesses to build brand loyalty.
Not Having Adequate Protection
Every business is a potential target for fraudsters. Whether it is a clever little cyberattack or a more traditional form of accountancy malpractice, you must always risk assess the threats to your business. They can come from multiple directions nowadays. If you are an organization that works mostly online, then cybersecurity has to be the top priority as scammers will be looking for ways to hack your digital infrastructure.
As a business with the cash flow, you will also always be at risk from auditing or accounting malpractice. It is essential, therefore that you know the recommended law firms in your area.
Find an award-winning law firm that is well trusted, it is good to keep their details on record in case the worst happens. You will be able to act swiftly and effectively to protect your business.
Expanding Too Fast
As a business owner, it is natural that you will view expansion as a critical measure of your success. If you can open more stores or develop more products or extend your brand, then why wouldn’t you? Well of course expansion comes with costs. It is crucial that development is done with caution and strategically planned out.
For instance, it might not be wise to open a store very far away from your base. While it will expose you to more customers, your brand may not have the name recognition or trust that you will have built up in your hometown.
Similarly, if you are suddenly expanding your product range, you will need to make sure that you have more cash flow to support this. You won’t just need to cover manufacturing costs. You will need a sufficient marketing budget to ensure customers or clients know about your new range.
Expansion can be brilliant, but don’t rush to do it before you have established yourself.
Not Employing A Diverse Skill Set
To get a business off the ground, you have a great set of talents. But you cannot do everything yourself. As you begin to take on employees, you need to ensure you are selecting candidates that will complement your skills and help your business grow. Therefore you have to be critical of your strengths and weaknesses. It is possible to self assess your performance. A truthful assessment will allow you to notice your deficits and bring in people that can support this.
If you only bring in replicas of yourself, then your business skill deficit will grow rather than shrink with each new appointment. The more expertise you can bring in the less likely you are to miss a critical opportunity or step into a potential pitfall.
While many of these warnings would encourage you not to be reckless, there is a potential danger on the other side too. Being too cautious can result in your business becoming tired and stale. The world moves incredibly quickly, and if you don’t keep up with trends or keep your brand looking contemporary or fresh, you could see your competitors rapidly overtake you.
Customers can be very loyal, but there is nothing that will bind them to your brand if a competitor can provide the same service for less cost or a better quality of a product. It is vital that you keep your ear to the ground, and up to date with the latest technologies in your industry.
Finally, remember these are warnings and not dire predictions. Even establishing a business is a considerable achievement that is worth celebrating. If you avoid these pitfalls, then your business has every chance of succeeding, growing and expanding for years to come.
Prepare for the worst but always strive for the best, and your business will be well equipped to handle whatever comes your way.