You probably know in these tough economic times most businesses fail in their first year of operation. Many of them who manage to survive are stuck and have a lot of problems growing sales and profits. There are many varied reasons that have a direct connection and influence on achieving success and getting results.
Today I am going to show you the most important and critical mistakes that are made by business owners and entrepreneurs. If you are making even one of them stop immediately.
”THE BIG CLIENT”
Many entrepreneurs can’t see they are in a serious trouble and their business is on the edge. They have one or two big clients that generate more than 50% of their profits. It’s also rather an optimistic scenario because I’ve seen business where over 80% of profits were coming from one big client!
You can think; if I have a big client I have less work, less costs and I generate more profits. Maybe you could even unreasonably consider that you are doing something in magnificent Way, but at some point in time you could be really surprised and it can cost you a lot of money and even lose you your business.
Companies in this situation don’t have any control over the price – it’s the ‘big client’ who dictates the terms, but what happens when this big client ends the partnership and, what’s worse, may start to cooperate with your competition?
In this case you can have a really serious problem that can lead to losing your business.
keep in mind the fact that many companies have never risen again after such a fall.
If you are in a similar position where most of your profits come from one or two big clients, change your strategy immediately and focus on getting customers in a proper and more efficient way.
CREATING NEW PRODUCTS AS A HOBBY
Many companies are presenting new products to the market thinking they have great idea. They spend a lot of money for product creation, presenting it to the market and finally it appears that nobody wants the product. Such a hobby can cost you a lot of money.
Before you decide to even create a product make a research on the market. Ask your clients what they need. Don’t ask them if they buy a product you have invented. Ask them what product they need and what benefits and result they expect.
Then try some test campaigns and if you have good results this is a good moment to bring a product to the market. Don’t find customers for your products; find products for your customers.
PRICING TOO LOW
There are a lot of price strategies but in many cases new companies try to compete on the market by setting lower prices. In fact lower prices mean you have to sell more products to keep a business running, often this is really difficult. Usually companies that compete on price have never even counted how many products they need to sell to break even.
The problem with low prices is that you have very little profit margin and so you have no budget for investing and marketing, and without marketing your business can’t grow.
Think about it. Do you have all the resources that Tesco has or Walmart or other retail chains to keep your business on the market? If you compete on the price is this really a part of your bigger strategy? Or maybe you think that by setting lower prices you can beat the competition at the speed of light?
A much better solution is proving and showing your value in an inventive way that gives you the opportunity to sell at higher prices. There are simple strategies and tactics that you can use to do it. They allow you to lower your costs, have a higher profit margin, grow your business and earn more.
SELLING TO A CLIENT ONLY ONCE
This is a common problem of many businesses. They focus only on finding and acquiring new customers. Of course it’s really important but don’t forget you can easily generate more profits with the clients you already have.
Why would you sell to a customer only once if getting this customer has cost you a lot of money, time and effort? You should focus on selling more and more frequently to your existing customer base instead of only getting new ones.
You can use upsell, resell, cross-sell, packaging, memberships, continuity and many other ways that can help you more effectively utilize every client you get.
LACK OF FOCUS ON THE MOST IMPORTANT THINGS
Many entrepreneurs desire, look for and pursue every new opportunity because of need to make enough profits to cover costs. As a result, they are not doing the things they should and in the most effective way they could.
You should instead focus your efforts on things that bring you the best results in line with your mission, vision and purpose. According to Pareto the 80/20 principle only 20% of efforts brings you 80% of results., so concentrating only on important things you will have many sources of profits instead of unrelated sources that are taking away your precious and valuable time.
NO MARKETING AND AN UNAWARENESS OF FUNDAMENTAL INDICATORS
In this article I was writing why the lack of marketing efforts is one of the main reasons most businesses fail. Another very important reason is making business and marketing decisions on the basis of good feeling and without knowledge about or considering return on investment.
When you want to take any action you have to know what your return on investment buying a product, service or technology may be. You should also know which marketing efforts are bringing you the best results and make decisions based on actual indicators of performance, effectiveness, costs of customer acquisition and the life time value of a customer.
NOT ADMITTING YOU WERE WRONG
It’s a really common mistake made not only by entrepreneurs. You are a human being and making mistakes is natural. Without making mistakes you cannot gain experience and grow. If you are not making mistakes… maybe you are genius or completely ignorant..
If you ever make a mistake, admit it, analyze it thoroughly and reach meaningful actionable conclusions. Forgive yourself and promise you will never make this mistake again. Fix it if you can and move forward growing your business as you do.
These are some basic and fundamental mistakes but if you stop doing them and eliminate them from your actions you have a real opportunity to make your business better, but not only – you can also largely prevent it from a failing.
With over 12 years of experience in Business, he positively impacted up to 1000 businesses with his training, consulting, international speaking and advice.
He's an active entrepreneur and business owner, he worked with Universal Music and owned a Music Distribution Business
Jack owns a Digital Agency (Brackets). He was involved in marketing campaigns for concerns such as Western Union, Mercedes, Ruuki, Hewlett Packard and numerous other well-known brands.