By Tim Lazenby, MD of FSB Insurance Service
We understand the daily pressures, trials and tribulations that starting and running a business brings. Here we will explore some of the pitfalls and vices small business should do their best to avoid.
Every small business owner will agree that life can be a bit of a roller coaster ride, with twists and turns around every corner. There will be inevitable drops, but at the end of the dark winding tunnels, come the peaks of the highest vertical loops.
What we’re trying to say is that, among the challenges, there will also be successes to demonstrate your hard work and determination.
Along this journey – with hindsight not included - mistakes are sometimes inevitable. But there are a few things you can do to avoid them and ensure the best possible start. Here’s our list of our seven small business sins.
1 – Not keeping financial records up to date
Admin might not be your ‘thing’ but keeping financial records is a legal requirement when you’re running a business. While that ‘insignificant’ receipt for a lunch meeting you went on last week may not seem like a big deal, every little adds up and can cause problems later down the line when you’re trying to calculate your expenses. Sometimes you don’t get a receipt for an expense – take parking metres for example – and people make a mental note to remember.
HM Revenue and Customs (HMRC) overtly states: "You must keep records of all your business transactions". It also states: "If you do not keep adequate records or you do not keep your records for the required period of time, you may have to pay a penalty."
What usually happens is that instead of making a note of the cost and date, people will get to the end of the month and end up ‘guesstimating’ how much they have incurred. Without the right paperwork and files in order, HMRC can easily – and frequently will – challenge a business. Not what you want for the sake of keeping business admin in check.
2 – Not understanding your audience
Your audience i.e. the people who will buy your services or products are one of the most important aspect of your business and without them, well, you wouldn’t really have a business.
You need to know who you are targeting and make sure you communicate effectively, across every channel, to reach that desired and much needed audience. If you’re trying to let the over 80s know about a new state of the art Zimmer frame via social media for example, then you might want to rethink your strategy.
Who is your target market? What do they do? How old are they? What communication channels do they use? How much do they earn? What do they eat for breakfast?
Once you have figured that out, it’s also important to know your business and how your audience can benefit from your services or products. If you run a wedding dress business, for example, the benefit seems pretty obvious – customers get to buy or rent a beautiful dress for their wedding, get married and live happily ever after. However, delving a little deeper, are your wedding dresses more suited to high income earners, leading luxury lifestyles? Or are they suitably priced for the everyday customer?
3 – Not researching your market place
When entering a new market place you need to be aware of who you are competing against. Failing to acknowledge your competitors is foolish and will no doubt be a costly error. There will naturally be well established businesses wherever and whichever market place you enter so you need to find inventive and creative ways to grab their customers’ attention.
Your first step should be to position yourself as a credible alternative and lure their loyalty by building trust as a basis for a long-term relationship. It’s important for new businesses to be able to communicate unique selling points to attract people away from the competition and provide a superior service to encourage repeat custom.
4 – Discounting too much
We all know that people like a bargain, but slashing prices to get people in the door may not be the best way forward. While customer acquisition is important, retaining them is even more valuable. So it’s better in the long run to focus on building a loyal customer base that responds to exceptional service and product rather than customers who are tempted on an irregular basis by cheap prices. After all you do normally ‘get what you pay for’.
5 – Failing to plan
Not having a plan is like having a car with no wheels, you won’t be going anywhere fast.
A business plan is required to map out your long term success and ensure you outline specific actions that need to take place to improve your business objectives and overarching goals. Business plans also allow you to keep on track of your finances. According to research by finance software provider, Exact, 70 per cent of companies with a plan turned a profit, compared to 52 per cent of businesses without a plan.
So, what are you waiting for?
6 – Fear of failure
One of the biggest obstacles of starting a new business is fear. Learning to deal with risk and overcoming your fear of failure will be one of the best lessons you can learn in the world of business. Changing your concept of failure and being more solutions focused will fuel positivity and install a belief that nothing will stop you but your own fear. Failure is unpleasant but it’s not the end of the world and if you do end up making a mistake, it can be an opportunity to learn what went wrong, and in turn, ensure you don’t make the same error next time.
Starting a business is one of the most fulfilling experiences of your life, so don’t let the fear of failure hold you back.
7 – Not celebrating success
Last but not least, celebrate your successes. There are so many benefits of celebrating successes. If you mark your accomplishments with a celebration they will be remembered in the future. It will bring together your team and make them feel appreciated. It’s also a reminder of all the hard work you put in to achieve your goals. Incorporating success into the culture of your business will also keep your staff motivated to continuously thrive.
If you’d like to discuss your business woes or to feel empowered with more info give us a call or join us online. The FSB team is here to offer advice and talk through how we can help you avoid small business sins.