Sidestepping these 10 common errors can help keep your company viable.
Starting your own business has its perks: You can be your own boss, choose your coworkers and control your work/life balance. However, according to Industry Canada, only 51 per cent of small and medium businesses survive the first five years.
Being a business owner is no small feat, and there are a variety of factors that influence whether your business succeeds or fails. Sometimes, you may butt heads with a partner or run out of financing; other times, failure may be caused by lack of planning or proper policies. Here are 10 common blunders that can put a company out of business:
- No business plan: You must have a business plan in order to succeed. Otherwise, your company is effectively directionless. For guidelines, refer to the Canada Business Network, which lays out the most common elements of a business plan and provides samples. Allot time to write a plan that identifies the purpose of your company, the strategies you’ll implement, and the goals you’ll accomplish. Keep in mind that, if you need financing, reputable investors will not fund a business venture if a company doesn’t have a plan — it’s too risky for them.
Related: Have you mastered your sales pitch?
- Working with the wrong business partner(s): Think carefully before partnering with a family member or friend. Personal and professional lines have the potential to be blurred, unrelated family issues may spill into the workplace, or a stakeholder may practice a casual management style that impacts your company’s growth and profitability. It’s important to have legally binding agreements and a contingency plan in case issues arise. Consider hiring a mediator to resolve conflicts as soon as they happen.
- Not creating a distinguishable brand: Your company name, logo, website and marketing collateral are inherently linked to your credibility, likability and perception with customers. Developing a suitable brand identity that stands out in your industry across all marketing channels shouldn’t be secondary to your other business priorities, it’s a necessity. It’s also crucial that you be consistent with your company’s messaging. This Small Business BC article offers tips on what to look for in a branding consultant.
- Downplaying the importance of lawyers: You don’t want to unknowingly sign away the rights to your business name to an investor or not have recourse when a client refuses to pay your invoices. Intellectual property agreements — which allow you to trademark company names, products and services — and client contracts protect your interests. Leave room in your budget for legal fees. It’s money well spent.
- Not putting employment policies in writing: When you’re starting a business and hiring staff, don’t overlook the importance of writing human resource policies and providing them to every new employee. If poor work performance becomes an issue, it will be difficult to discipline, track or prove cause for termination if staffers weren’t informed in writing of your performance expectations.
- Not focusing on your customers’ needs: You feel you’ve created a fantastic product and it’s unlike anything else on the market. The question is, have you considered the benefits for potential customers? Sometimes we get swept up with an idea and don’t focus on the big picture. You shouldn’t try to sell a product or service until you have a clear understanding of your customers’ challenges and how you would provide solutions for them.
- Taking “no” for an answer: Dealing with rejection is part of being a business owner. After a potential customer turns you down, your first reaction shouldn’t be to delete them from your database. Ask probing questions to find out what they’re looking for in a service provider and then outline the key advantages they can gain from working with you instead. It can take between 10 and 20 persistent follow-ups with a prospect to turn them into a customer.
- Giving others too much control of the cash: It may sound like standard business practice to give certain individuals, like your partners and accountant, signing authority on your business bank accounts and permission to withdraw funds, but unless they are completely trustworthy, this could be a costly mistake.
- Only relying on social media to market your business: Although LinkedIn®*, Twitter®†, Facebook®‡ and other social networking websites can attract customers, build your brand’s presence and boost sales, they should not be your sole options for marketing. Issuing press releases, publishing articles in trade publications, direct mail advertising, sponsorships, rewards programs and content marketing can also help you grow your business.
- Not charging enough for your services: It’s only fair that you should be paid for the true value of your work, says Moneysense.ca. When you’re a fledgling company, you may be tempted to work for free or for a lower wage to build relationships and get your name out there. But you need to make a profit in order for your business to survive. If you’re great at your job, employers will be willing to adequately compensate you for your talents.
For more information on managing businesses, refer to BMO’s Business Coaching Series, which covers everything from finding sources of capital to measuring performance.
®* Registered trademark of LinkedIn Corp.
®† Registered trademark of Twitter, Inc.
®‡ Registered trademark of Facebook, Inc.