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Business Survival

Pitfalls to Avoid

Here’s what you can do now to save your business from an early demise.

Cliff Ennico

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One of the biggest mistakes you can make as an entrepreneur is to have certain assumptions with little or no foundation to them. To grow your business, you need to separate the facts from baseless theories. Here are some common mistaken beliefs:

Related: The Numbers to Know to Grow Cash Flow

“My customers will be loyal to me”

  • Customer and brand loyalties are not as strong as they used to be. People won’t buy from you just because they’ve bought from you for 30 years. If a new competitor is offering a better price to your customers, and the cost of changing supplier isn’t all that great (for example, if the cheaper competitor is located in a faraway, hard-to-reach place, people may continue to pay your higher prices for the convenience of a shorter trip), people will switch to the competitor in a heartbeat.
  • By all means, provide better service than your competitors, but don’t count on that to save you. You should also offer the lowest prices around and keep your costs even lower.

“I really don’t have to market my goods because if I do a good job, the word will get around”

  • People don’t talk much about the positive experiences they have with their professionals or service providers (although they talk long and hard about their negative experiences!). Also, people aren’t staying in one place long enough to learn about local reputations. While your reputation is certainly important, it doesn’t attract new clients or customers.
  • In any business, you have to get in people’s faces and constantly communicate what you do, how you do it and why you’re better than the competition, in a way that doesn’t turn people off.

Related: Marketing’s Best Kept Secret

“My business has no competition”

  • If you think this, it’s because you gave the marketplace a quick look and saw nobody doing exactly the same thing as you. Not all competitors are obvious to the naked eye, though. Sometimes your competition isn’t a person or a company, but rather a thing. Book publishers, for example, compete not only with other book publishers, but with the Internet.
  • Sometimes your competitor may be doing something entirely different from you. A suburban pizza takeaway outlet may have a local monopoly on Italian food, but the Chinese restaurant across the street is certainly a competitor for the “quick lunch” or takeaway dinner customer.
  • Sometimes your competitor hasn’t yet decided to compete with you. Back in 1995, Netscape dominated the US market for Internet browser software. There were no significant competitors. But in Redmond, Washington, a guy named Bill Gates was thinking about getting into the browser market, and the rest is history.

“I don’t have partners or employees, so I must do everything myself”

  • Just because you’re legally the sole owner of your business, doesn’t mean you have to do everything yourself. Sooner or later, in any business, you learn that there are a handful of things, five or six at the most, that must be done well in order for a business to succeed. They vary from business to business, and sometimes take awhile to figure out, but they are there, and you must learn them.
  • For example, in my consulting business, one of my essential activities is to get written invoices out to my clients promptly at the end of each month. I’ve learned the hard way that if you don’t get your invoices out, your clients don’t pay you, and they’re more inclined to haggle over your fees when the belated invoice finally arrives.
  • Once you’ve mastered the five or six essential activities in your business, it’s critical that you do them yourself because no one – not your employees, not your partners, not your spouse – will devote the same level of attention to performing them that you will. Everything else should be delegated to outside contractors, and their fees made a cost of your doing business.

Related: The 18-Minute Ritual To Boost Your Productivity

“If I make enough and sell enough, and there’s money in the cheque account, I’m successful”

  • Many entrepreneurs believe you can ignore profits if enough people are buying your stuff. Every business owner has to agonise over what his products and services truly cost. It seems sometimes that every day you stumble across a “hidden cost” you didn’t know you had. One young lawyer told me how proud he was of how successful his solo law practice was – he had literally hundreds of clients – until I gently pointed out to him that when you factored in the number of hours he was working every day to keep those clients happy, he was making only R50 an hour after taxes! Today he works as a paralegal for a large law firm – a little less money, but a much better return on his investment of time.

“I can’t really afford a lawyer, so I’m going to do my own contracts”

  • Every business involves some form of legal agreement. They can be as simple as an invoice form or purchase order, or as complex as a 50-page property lease. Sometimes you draft them to be signed by others, sometimes others draft them for your signature. Every one of them, including standard forms, should be reviewed by an attorney before you use or sign them.
  • Let’s face it: few people truly enjoy dealing with attorneys and nobody likes to pay legal fees. But when it comes to protecting your interests, the legal route is the best, and only, way to go and is bound to prove worthwhile in the long run.

 

Cliff Ennico is a syndicated columnist and author of several books on small business.

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Business Survival

How To Have Your Store Run Smoothly Without You (So You Can Take A Well-deserved Break)

Below are some tips that can help ensure the smooth running of your store even when you’re not around, and let you take that break without the stress.

Higor Torchia

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It can be hard for business owners to take time off from their retail stores – whether that’s because they’re too busy, need to be around to make decisions, or simply feel they can’t relax without knowing how the business is tracking. But taking a break can be incredibly important, if not sometimes necessary. And as we head into the busiest retail season of the year, taking a break now before the rush could be the best thing you do – for yourself and even for your business.

Below are some tips that can help ensure the smooth running of your store even when you’re not around, and let you take that break without the stress. 

1. Make the most of technology that lets you keep an eye on your store from anywhere

The beauty of living in this modern age is that there’s an abundance of tools that can help you run your store even when you’re away. To do this, cloud-based software is the way to go. Using a cloud-based solution to run your store means that you will no longer have everything housed on your computer server in one place. Instead, you can access files, sales and stock data, financials, business reports, customer and even employee data from anywhere, in real-time, and from any device provided you have an Internet connection.

The other beauty of cloud-technology is that it’s usually relatively inexpensive compared to more traditional systems. If you haven’t done so yet, look into some cloud-based software options, such as point-of-sale and inventory management, accounting and finance, customer management, and employee management and scheduling.

Related: 5 S-Words Make Your Store Site Pay For Itself

2. Develop a store manual

Create a manual that your staff can turn to when you’re not around. Document procedures, contact information, and anything else that will help your employees to know just what to do in your absence. Some of the sections you may want to include in the manual are: 

  • General store information – What do you stand for? Who are your target customers? Instil this information in your staff. The more they know (and love) your business, the easier it’ll be for them to make decisions in line with your company values. Include details on personnel conduct, pay and scheduling, store access, conditions of employment, store policies, etc.
  • Customer service – Have an entire section dedicated to taking care of customers. Include information on conduct, customer service standards, lost and found procedures, and dealing with difficult customers. Also, provide detailed instructions on how to handle theft and shoplifters.
  • Cashier procedures – Include information on the operation of your POS software, the types of payments you accept and how your loyalty program works.
  • Contact information – Take note of the tools you use in your store (computer, accounting software, analytics, cameras, etc.), and provide basic instructions on how to operate them. These tools likely come with their own manuals, so make sure that employees know where those documents are and how to contact the vendor if required. Include the contact details for the individuals or entities that your store deals with, including vendors, suppliers, business partners, contractors, etc. Also have a list of emergency contacts, such as the local police and fire department, as well as medical facilities in the area.

3. Appoint a second-in-command

Pick a second-in-command (or 2IC) to take charge of the store in your absence. This person should be someone you trust who knows the business.

It’s best to hire someone from the inside — ideally an individual who’s been in the business for a few years (this demonstrates loyalty) and has shown strong leadership skills or initiative.

Related: Why Launch A Member-Only E-commerce Store?

4. Empower your staff

Of course, the success of your store doesn’t depend on your 2IC alone, which is why it’s important to empower all your employees always do their best, even when you’re not around. This can be accomplished by giving them adequate training and by fostering an open environment that recognises the efforts of each team member. Encourage questions and be sure to give them specific as well as big picture answers so they know exactly how their actions affect the company.

It is important that you clearly define the roles of each staff member. Establish who’s in charge of what and require your employees to be accountable for their actions. Finally, believe in your employees and show them that you do. Trust you did your job right when you hired and trained them and that they’ll be fine even when you’re not there.

5. Do a test run

When should you start planning for your absence? That depends on the nature of your leave and how long you’ll be away. If you’re planning to be out of the office for a few days, then giving your staff a heads up a week or two before would be enough. But if you’re planning for maternity or paternity leave, then obviously your team needs to be notified months in advance.

Still worried? Implement a test run by consciously getting out of the staff’s way for a day or two. Work from home for a while or stay in your office instead of the sales floor and tell your 2IC to handle the store. Consider hiring secret shoppers who can put your staff’s skills to the test and have them report the findings, so you can figure out ways to improve. 

With Christmas and holiday season fast-approaching, now is a great time to start empowering your team so you can find the time for a well-deserved break.

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Business Survival

Stop Surviving And Start Thriving In Business

It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.

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To thrive – and not just survive – in business you need three basic building blocks: 1) attract more customers and clients; 2) who spend more; and 3) buy more often. But how do we make this happen in the tight, recessionary environment we find ourselves in South Africa?

Despite the tough economic conditions, businesses can still thrive. In fact, many small businesses have been found to thrive in difficult economic conditions and are known as counter-cyclical businesses.

So how do you turn the tide from surviving, to thriving? You need to start thinking creatively, making informed decisions and being agile in the business environment. Always start with your marketing strategy. It will inform your operations, which will inform your human and asset capital and lastly, the financial investments you make.

Related: Business Basics: The Four M’s Of A Successful Start-Up

Ansoff Growth Matrix

Business leaders continuously explore various growth strategies to retain and grow market share. One of most respected and often used is the Ansoff Growth Matrix. It was first published in the Harvard Business Review in 1957, written by strategist Igor Ansoff to help management focus on the options for business growth. Ansoff suggested that an effective strategy considers four growth areas, varying in risk. This strategic planning tool guides us to understand our current situation, contemplate strategic options and consider the associated risks.

  1. Market Penetration: Market penetration has the least risk of the four options. Here you are selling more of the same things to the same market. You know your product and market well. The question is, how can you defend your market share and sell more to your existing customer? You may consider special promotions or introduce a loyalty scheme.
  1. Product/ Service Development: Product and service development is slightly riskier as you introduce a new component into your existing market. The advantage is that you sell to a customer/ client that you know, and they trust you. Ask yourself how to grow your product and service portfolio? You may consider adding new services and products or modifying your existing offering.
  1. Market Development: With market development you target new customers and clients with your existing products and services. You sell more of the same things to a different market. You can consider new sales channels, online or direct sales. Do a proper market dissection to target different groups of people, considering different age groups, gender and demographics.
  1. Diversification: Diversification is very risky. Here you consider introducing a new, unproven product or service into an entirely new market that you may not fully understand. You may need new expertise, acquiring another business or venturing into another sector. The main benefit of diversification is that during difficult times only one component or element of the business may suffer.

Related: My Business Is Growing… What Now?

The fifth element: Passion 

In addition, I would add one more element critical to business growth: Passion. It is the single component most critical to business success and, combined with any one or combination of the four areas of the Ansoff Growth Matric, it can equip small business owners with all they need to thrive in their business environment. Passion determines your business success, so make sure you have it in heaps to reap the rewards of your hard work.

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Business Survival

6 Common Decision-Making Blunders That Could Kill Your Business

Among the logical errors nearly everybody makes is thinking only everybody else makes logical errors.

John Rampton

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Humans are often very irrational. If you’ve ever explored behavioural economics or psychology, you may have found a host of examples demonstrating situations when we make objectively bad decisions.

Below are six of the largest decision-making blunders we all make. Avoiding them will dramatically improve your decision-making, your quality of life and success.

1. Sunk-cost fallacy

Of all the ones on this list, the sunk-cost fallacy is the most common. Many of the decisions we make are final or difficult to change. For example, let’s say you invest R1 000 in Facebook, and the price of the stock goes down to R600 the following day. The fact that you put in R1 000 initially is irrelevant to the situation at hand; you now have R600 worth of Facebook shares.

What this means is that once the decision is made and our cost is incurred, there’s no point thinking back. You already put in the time, money or other form of investment. Considering that in any future decision is illogical, despite how tempting it is. Instead, present yourself with the new options at hand — without considering the sunk cost.

Related: The 3 Dumbest Business Mistakes New Entrepreneurs Make Most Often

2. Narrow framing

Would you take this bet? You pay me R1 000 if a flipped coin lands on heads and I pay you R1 200 if it lands on tails. Most people would say no. We tend to be risk-averse, unwilling to risk something like R1 000, despite the reward being a bit greater.

Now, what if I offered you that bet, but I promised we would flip 100 coins? Each time, the loser pays up. Would you take it then?

Almost certainly, right? The chances that you lose money, overall, are extremely slim. This idea can be applied throughout life. When we’re in situations that will repeat themselves over time, we should take a step back and play a game of averages.

3. Confirmation bias

Another common one in the worlds of psychological and behavioural economy is confirmation bias. It hurts our ability to keep an open mind and shift our opinion. When we have a held belief, we typically look for information that confirms our opinion while ignoring data points that tell the opposite story.

For example, if I’m really excited about a new software product that I just integrated into my business, with ten of my employees as users, I might have made up my mind about the quality of the service before we put it to use. I would then be more likely to listen to the three employees who enjoy it, not the seven who don’t.

There’s almost always information that will validate our opinions, no matter how wrong they might be. That means we need to always look for conflicting evidence and, from there, make judgements based on more well-rounded information.

Related: 6 Rookie Investor Mistakes You Must Avoid For Profitable Investing

4. Emotionally driven decisions

When we’re angry or upset, we’re much worse decision-makers. When you have to make an important decision and happen to be in a bad mood, you should hold off. Instead, wait until you cool down and can think more clearly. It will remove the outside influences and let you think more rationally.

5. Ego depletion

This one makes intuitive sense, but it’s one of the most common ways to make bad decisions. The idea of ego depletion is that when we’re drained, physically or mentally, we’re less likely to think critically. Think about the times you’ve been exhausted after a long day of work. In those moments, you don’t want to have to think hard about anything. Instead, you want your brain to work automatically.

What that means is that when you’re tired and faced with challenging choices, you’ll rely more on your instinct or automatic processes as opposed to analysis and thought. That can be extremely problematic in situations that require effort.

6. Halo effect

The halo effect says that once we like somebody, we’re more likely to look for his or her positive characteristics and avoid the negative ones. This is similar to confirmation bias, but it’s oriented around people.

Related: 10 Stupid Mistakes Smart People Make

For example, let’s say I just hired someone named John, who was great during his interviews. Through his first few weeks, John does a few things well at work, but he also does many things poorly. The halo effect — brought on by his wonderful interview persona — could cause me to ignore his poor attributes and emphasise his good traits.

This can be detrimental to our ability to make judgements about others. We have to realise our biases toward certain people and eliminate them.

These are a handful of the many decision-making errors we’re all prone to. Although it’s challenging to scrutinise your preconceived notions, doing so is worthwhile. It gets easier over time and will, ultimately, make you a more effective decision-maker — personally and as a business owner.

This article was originally posted here on Entrepreneur.com.

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