Unfortunately there’s no Holy Grail of business ownership; a goblet, that upon taking a sip, you’re bestowed with all of the information necessary to run a thriving enterprise. Many times running a business can feel like quite the opposite; a toddler’s sippy cup spilling on your head, with you scrambling around to find a napkin.
Thankfully we live in a hyper-connected world with infinite information at our finger tips. The only crutch is that there’s enough information and business tips out there to make your head spin! We felt it could be helpful if we put together a short synopsis of common business struggles, a “pocket guide” to ensuring you’re taking all the steps necessary to keep your business on track and growing.
Here are 7 traps we often see business owners fall into, and how you can avoid falling victim:
1. Skipping Market Research
Data is powerful. Far more powerful than a gut feel or a family member’s recommendation that something would make a good business idea. If you flip a coin twice and it lands on heads two times, one could naively make the assumption that “every time I flip the coin, it will land on heads” when in reality, we know this is not the case. Now if we flip that same coin 500 times and the results show 240 heads and 260 tails, we have a much stronger indication that there is indeed a 50/50 chance of outcome. Launching, sustaining, and growing a business is no different. You’ll need to gain insight from a variety of people and sources to ensure the market is ready for your product or service your business intends to fill.
Be cautious of bias within your information, or people telling you what you want to hear. It’s generally a good recommendation to gain insight from your peers or connections as well as validated market research from credible publications and analysts. Your competition is often a great gauge as well. Alongside geographical location and target demographics.
In short, it’s best to be thorough and uncover that you need to change your business model than to be swift and launch the wrong business and bang your head against a wall for years trying to successfully gain market share. Entrepreneur has a great article about how to conduct market research for your business.
2. No Business Plan In Place
Market research is just a piece of the puzzle. Really what all entrepreneurs needs is a practical business plan that outlines not just market research, but also their competition, product prices, how you’ll grow your management team, and at what rate you believe you can take on market share and grow revenue.
This is another opportunity to take your time. It’s far too common to introduce a poorly crafted business plan to an investor, partner, or client that would’ve given you a resounding “I’m in!” if they perused through a well-calculated means of achieving your long-term vision.
We recommend using a tool like LivePlan to help guide you through the process. It’s a great tool for not only launching a business, but also to re-craft a plan for businesses already in operation, something you’ll inevitably want to do many times as you continue to grow.
3. Rushing Through Business Formation & Legal Documents
Are you noticing a common trend yet? 😉 “Slowing down to speed up” is a very relevant phrase when launching a new business. And before you launch a business, it’s a good idea to “form” one to begin with, and do it right.
There are a lot of discount online services out there like LegalZoom for everything from an LLC formation, to legal advice, to accounting tools and trust me – I won’t be the one to sit here and poo poo on anything that’s affordable or easy to use, as that’s the exact reason we built our company 😉 However, I’d highly recommend finding a competent (preferably local) resource who can help guide you through the process, especially if you started with one of these services and have a “default” Operating Agreement or other formation documents that will inevitably need to be more custom tailored.
I’ve personally fallen victim to “rushing through” the initial formation process, only to have to change business structure later down the road when we elect to take on investment capital or form an ESOP (Employee Stock Options Plan). Whenever you have to go back and redo something, you’re always expending more cost than necessary, when you could’ve had everything buttoned up from the start.
Outside of initial formation, you’ll inevitably run into circumstances numerous times within your first few years of business where you’ll need to draft agreements. Maybe it’s a compensation agreement for your sales team, maybe it’s a new partnership agreement. We merely need to look at Murphy’s Law to find out “what can go wrong, will (eventually) go wrong” to have a moment and truth and realize it’s better these agreements are drafted by a legal professional who knows how to evaluate potential pitfalls and not written on the back of a napkin.
4. You’re Not Charging Enough!
Yes, I know it sounds like a line straight from Mr. Wonderful on ABC’s Shark Tank, but at the end of the day, you’re in business to make a profit. What drives you might be your mission, what you’re doing for a community, and how you’re instilling value, but what drives your business if profit. Period.
As an extension of your market research, make some fabricated calls to your competitors in an attempt to gather quotes. Once you’ve done this about 5-10 times, you’ll get a good idea of what your competitors are charging and the type of service they intend to deliver in exchange for said money. At that point, you can decide if there’s any opportunity to undercut your competition on cost. (Hint: As a newer business, there probably isn’t much) Instead, try to focus on areas where you can differentiate your business in the value that it delivers, not the cost. You’ll have deeper pockets and a much more appreciative and binge-worthy following for it.
5. Not Investing Enough Into Marketing
Marketing should always be looked at as an investment, and never an expense. Any well-performing marketing campaign will show twice on a financial statement (P&L); as an expense and also as a correlation to increased revenue. If this isn’t happening, you just need to continue experimenting and iterating, but don’t throw in the towel.
Too many companies look at marketing campaigns as a burden, as opposed to a core business driver. I suppose it can be a burden from a preparation and a research standpoint, but the good news is that the resources are an arm’s length away. We live in the information age, where a Google search for “best marketing tips for 2018” or “how to market landscape business” will each pull up hundreds of articles.
Read those articles! Print them and mark them up if needed. Make an Excel list with various forms of marketing and track ROI manually if needed. Whatever you do, don’t lose hope, and don’t go into this blind or your competition will smoke you…
Here’s a great starting point: RevLocal: 12 Digital Marketing Ideas for Small Business in 2018
6. You Waited Too Long To Seek Financing
A common sales tactic we utilize here at Strategic Capital is when we’re consulting our clients on a business line of credit, we often say “it’s better to have it and not need it, than to need it and not have it”, but you know what? – It’s not just a sales strategy, it’s the truth and we say it because all we had to witness was one time where a client neglected an offer, only to come back months later in desperate need for capital, but they could no longer qualify. We want to save other clients from this potential mishap!
It’s not about owning a pristine and perfect business. (Hint: There’s no such thing) It’s about coming to the realization that some months are going to be much stronger than others, and utilizing those strong months as a means of obtaining the best approval terms possible.
Reach out to one of our Capital Advisors today to learn more about our process and how we can help align you on a long-term road map for success.
7. The Accounting Numbers Are Being Ignored
helpful quintessential as you focus on growing the business. Find a reputable and local bookkeeper who can help you reconcile your books once monthly. This is Step One.
Step Two is yearning to have a more thorough understanding of your own books and financials. Once this process starts, you’re well on your way towards utilizing your QuickBooks account as a valuable asset towards setting up growth plans, budgetary cuts, hiring, terminating, growing one division while shrinking another, etc..
As always, we’re here to answer any questions you have pertaining to your business, whether they be related to financing or not!
Checking for pre-approval will not affect your credit score.