While not every industry is the same and constructing a recreational dispensary in California’s newly legal market requires different paperwork than opening an organic juice stand in your local library, there are generalities in business.
Half of the legitimate businesses in the U.S. fail within the first year, according to the Small Business Administration. Even for experienced pros, opening and nurturing a new business isn’t easy. Throwing money at the situation doesn’t always help, and there is no easy way to succeed. However, there are some things that make failure more likely.
This article will guide you through common mistakes business owners make that make it much more difficult to succeed. Even if you survive the first year, you’ll notice the strain of these mistakes as time goes on, especially when scaling operations.
- Using a Cash Register
- Ignoring the Data
- Not Planning
- Expanding Too Fast
- Overestimating Revenue
- Not Doing Inventory, Accounting, etc.
- Hiring the Wrong People
Using a Cash Register
Cash registers are outdated, but that doesn’t mean you have to just stick to mobile card readers like Square and PayPal Here. What modern businesses use these days goes far beyond that – many opt for cloud-based POS platforms that track customer data, enable promotions and discounts, connect to HR, marketing, and inventory systems, and so much more.
Not only do cloud-based POS systems outperform cash registers, the upfront cost is often cheaper, as many of the manufacturers use monthly HaaS and SaaS subscription pricing models. This helps bootstrapping businesses free up capital to have the liquidity to overcome the many obstacles businesses face. The reporting a POS system provides can help you identify and track key metrics, such as highest performing salespeople, best-selling items, and busiest times of day. With that data, you can make better business decisions and increase your efficiency.
Related Article: Replacing a Cash Register with a POS System.
However, don’t just go for the fanciest system or forget to check on the additional costs. POS systems often integrate with credit card processors to allow you to conveniently take credit and debit cards, but that costs money, too. Be sure you’re getting good pricing by using a quote comparison tool.
Ignoring the Data
Even without a POS, there’s simply no excuse for not having the right data these days. Free web analytics like Google Analytics help you understand who’s checking out your website or build a sales funnel and online marketing strategy to refine it. Paid services like Hubspot (which costs $200+ per month) take things even further by creating and automating content across platforms, setting up social media and email outreach, and more.
Market research is important for businesses to continue innovating. Without it, you won’t know what customers want, what the competition is doing, or even how you’re doing. Reporting is easy to ignore – that’s what many entrepreneurs started their own businesses to avoid. However, data analytics is important to identify trends, forecast, and refine your business.
Related Article: 6 Reports Every Small Business Should Run.
Whether large or small, every business in every industry needs a business plan. It’s required to even apply for a business license (though a more detailed one is needed to run a real business) and will drive the direction of the company. Running an aimless business causes businesses to build the wrong team, follow inconsistent processes, acquire unnecessary resources, and inevitably drive the company into the ground.
New projects are constantly coming up in business, and project management depends on planning. Each individual worker needs to be on schedule and communicate progress to keep the rest of the team from halting business every time. Everything from daily operations to emergency contingencies should be properly planned from the start to avoid costly mistakes.
Expanding Too Fast
Some companies want to be everything to everybody, hoping to reach high numbers of investment capital or big profits. However, sometimes expanding too fast can have dire consequences. Popular social marketing company Lularoe, for example, is already facing a Lululemon-like backlash against product quality and sales structure during its quick expansion. Even Uber is facing a slew of lawsuits from drivers, municipalities, and traditional cab companies during its legendary expansion.
Instead of rushing to expand, take time while you’re smaller to improve quality, lay out solid processes and procedures, and find the most efficient way to get things done before bringing on a bigger crowd of customers that you can’t satisfy.
Related Article: Am I ready to expand my business?
The worst thing new businesses can do is spend lots of money. During the euphoria of starting up, it’s easy to find cash to spend on consultants, marketing spots, and upgrading everything in sight. We know the spending is going to catch up with us, but we justify it based on projections of future sales. But what if the revenue never comes?
Whether you’re an individual citizen, sole proprietor, small business, or large corporation – cash is king. Cash rules everything around you, and if you don’t have it, you’re going to be dead in the water. A lot of what you do in the beginning may turn out to be wrong regardless of how prepared you are, so don’t make promises or plans based off revenue you’re expecting. Base decisions on your cash on hand.
Not Doing Inventory, Accounting, etc.
I already touched on why data in general is important, but internal data is especially important. It’s impossible to sell something you don’t have and waiting for a replacement order can take days or weeks. Therefore inventory management is important. In fact, all business operations are important. Timekeeping, accounting, and HR are how businesses keep employees happy, business running smoothly, and revenue optimized.
Accounting software like QuickBooks, FreshBooks, and Xero are excellent accounting platforms and your POS and payment gateways are easily integrated with them.
Whatever tools and whatever people you hire to do it, get these essentials done before they sink your business.
Related Article: Comparing QuickBooks, Xero, and More.
Hiring the Wrong People
CNBC’s Marcus Lemonis constantly stresses the health of a company is measured by the people, product, and processes. Never underestimate the value of your employees, as people are the lifeblood of any organization. They’re the people who will be carrying out the business operations on a daily basis and can easily drive it in the wrong direction if not properly screened and maintained.
With proper planning you can avoid overstaffing, but you’ll still need to properly vet and screen employees before hiring them. Refine your interview process and consider a third-party service like SentryLink to ensure each employee is a fit for the work environment.
Not every business fails, and many last a long time without ever learning the basics of business. Many of those cash cows inevitably seize up and die, however. Companies like General Electric that stay in business for generations do so because they understand and apply certain business fundamentals. Investing in the right technology and people to build your team is a great start. But don’t overspend or you’ll hit a wall fast.
Staying on your grind and following consistent practices won’t always provide an immediate tangible benefit. Don’t worry – the overall effect over time is infinitely worth it. Avoid becoming a statistic and stay in business for as long as possible by sticking to these guidelines.