HERE’S eight simple things you can do to wreck a new business:
1. Put too much trust in your market research.
The purpose of market research is to find out what people would like to buy. Often, if you ask your friends, they’ll give you the answer they think you want to hear. Even if you do your market research properly you can get the wrong answer. Dick Hubbard, the maker of breakfast cereals, found that people thought they wanted healthy food but discovered later they really wanted tasty food.
2. Find out what people need and try to provide it.
Supply wants, not needs. Many small businesses need a lot of business education but very few of the proprietors really want it. People buy to satisfy their wants not their needs.
3. Buy a nice new car you can’t afford.
The usual excuse for sinking money into a car when you can’t afford it is “I can’t turn up to make sales in an old dunger”. This is not really true in most cases. The car is frequently parked where it can’t be seen anyway. If the customer did see your car it would be unlikely to make much impression so long as it was reasonably tidy. Someone like a sharebroker might be an exception. Who’d want to deal with a sharebroker who couldn’t even make him/herself rich?
4. Run out of cash.
Business is about cash flow. Some business owners must have difficulty sleeping at night. They chronically have too much borrowed money. A retailer owned a mere 10% of his business and decided to open another shop. The disaster was inevitable. If you lean on your creditors by being a chronic slow payer, a puff of bad economic wind can blow away your business. Focus on good cash flow. Collect your debts and control stock levels.
5. Forget the figures.
Few small business owners keep enough information about how their business is progressing during the year. There are usually only a few key factors which need your attention. We could discuss these with you. Often, a downward trend starts in a business and the owners become aware of the full extent of the losses only when their financial statements are prepared; often half way through next year. By that time the drift has gone on a further six months beyond balance date so the situation is worse than the figures indicate.
6. Split up.
The split of a marriage or personal partnership can have devastating effects on the business. We have no suggestions for a solution – just be aware of the effects!
7. Talk too much.
It’s hard to control those telephone calls. Some people just like to talk too much. You learn more from listening. You earn more by working on your business. Some people are utterly ruthless about avoiding telephone calls, which could otherwise take a large part of the day.
8. Spend too much time on the figures.
The object of going into business is to make money otherwise, why bother. Paper work is a necessity but unless you are an accountant it should not be an end in itself. Get yourself efficient systems. Minimise the time needed to operate them. Maximise the important information they supply for you. Again, we can help you minimise your administration time.