These days business owners have many challenges to overcome to build a great successful business. Here are a number of mistakes often made that could lead to unnecessary additional obstacles that should rather be avoided.
Creating an equal partnership seems fair in theory and typically works well for a while. However, sooner or later disagreements arise and the company is then in limbo because no partner has the final say. Eventually this will erode the company’s growth. It is wiser to give a managing partner ultimate control and a majority ownership stake – even if it’s only 51%. Alternatively, grant a small percentage to a third party advisor who will serve as the tie-breaker for the partners.
Elusive Product Perfection
Perfection is unattainable, but that doesn’t stop many entrepreneurs from spending a lot of money trying to achieve it. Even if the company did finally make the perfect product, the market will change and eventually make the product obsolete.
Relying On One Big Customer
If you depend upon a single customer for more than 50 percent of your company’s revenues, your company may be headed for a meltdown. It may be easier to manage one or two big customers, but if you lose a major customer, you run the high risk of business failure.
Creating Products in a Marketing Vacuum
Some companies put all their efforts into an idea, then develop a product or service – only to find there are no buyers for it. It is crucial to perform market research in advance to determine whether anyone will buy.
Low Price Strategy
Companies should charge the highest prices its markets will allow. Too many entrepreneurs attempt to make up for low margins with high volume.
Being unrealistically optimistic can inflate sales projections, shorten product development timelines and minimize expected costs. It is important to check and re-check the financial business assumptions underlying the proposed venture and only proceed when capitalisation can support the worst-case scenario.
Small business owners often lose focus on the company’s core areas – product or service, markets and distribution channel. Concentrating efforts in a limited area almost always produces better results than diversifying.
In a quest to live the high life, entrepreneurs sometimes let expenditure inflate more than revenue. Spend the money necessary to achieve the company’s objectives, but nothing else until profits justify the expense.
Huge Return on Investment (ROI)
If the company cannot articulate the ROI that clients will earn from its products or services, how can it expect customers to understand its value proposition? Do the analysis. If the company can demonstrate a great ROI, sales will be inevitable.
Refusal to Admit a Mistake
The biggest mistake an entrepreneur can make is to ignore failure. If success has not come to the venture, wipe the slate clean and reassess the investment. Assume the original investment has been lost and decide from that perspective whether you can justify further investment. If not, walk away.
Pieter du Plessis is a Franchisee of the global business coaching company – ActionCOACH. He is a Chartered Accountant and an accredited Business Coach assisting business owners to significantly grow their profits and develop their entrepreneurial skills. To find out more about Business Coaching or to receive a complimentary coaching session,call 012-0040379, email PieterduPlessis@ActionCOACH.com or visitwww.pieterduplessis.co.za