Don’t Quit Your Job…Yet!
Are you considering quitting your “day job” to start a business?
3 COMMON MISTAKES NEW BUSINESS OWNERS MAKE AND HOW TO AVOID THEM
1) Not know who the top leaders in their industry are locally or nationally.
How can you compete in a market when you don’t know who you are competing against? Smart business owners do the homework doing the planning stage of their new business.
By completing the research they discover who is doing the best in their industry locally and nationally. New owners will want to understand what the competition is doing right so they know where the benchmark is set for their new business. They will also need to know what the competition is missing in order to enhance their businesses’ offerings.
2) Not getting a Mentor.
Everyone thinks they know how to run a business, but the truth of the matter is, over 90 percent (90%) of people open a business with a great deal of product knowledge and mistakenly think that it is business knowledge.
Not having a mentor maximizes the chances of failing! Not just anyone, but someone who has been doing what the new business owner plans to do and has done it well for more than 6 years. Yes, more than six years. The goal is to find someone who has endured the “five-year death sentence” that has been the final diagnosis of most new businesses.
3) Thinking they can steal the competition’s customers by having a lower price only.
This is the most critical mistake most new business owners make. Why? Because it hurts them more than their competition. By being “cheap,” they cheapen their brand and the value of their product/service. It is hard to recover from cheap.
Yes, luckily, they may get customers at first, but if they have overhead and are forced to raise their prices those customers will flee. Go in smart by using the correct comparable price and win customers by adding value to the existing industry price. When you add value, the new customers will appreciate the additional benefits at the price they are accustomed to paying.
Three Financial Mistakes Business Owners Make & How To Avoid Them
In the time of LSMB Business Solutions’ existence, I’ve ran across all types of small business people. Some have been in business for several years. Some are new to business ownership. Some are somewhere in between the two before mentioned.
The commonalities are pretty much the same. Most business owners know all there is to know about their “widgets,” and they think they are the best at it! If you don’t believe me, just ask them. They will straight out tell you no one can do it as well as they can do it. Confidence is a great thing to have when you a business owner. Why? I’m glad you asked. Without confidence, no one will buy into their products or services. (Smart moves, business owners.)
Product knowledge is the second thing I’ve found that most business owners have. Some many have more of it than others, but most business owners know at lease the preliminaries about their widgets. Like confidence, that is good, as well. Why? Boy, you are so good at asking the right questions! This is good because no one will buy a product or service from anyone who cannot respond intelligently when they have a question. However, in business confidence is not enough and product knowledge, whether a little or a lot is not enough either.
Now that you know what business owners know, let’s discuss what they don’t know. When interacting with the business owners I’ve met over the past three years or so, I’ve found that the majority of the business owners do not know following three things, so I’m going to tell you how you can avoid them.
- Knowing how to price their widget
Most business owners do one of two things. They either guess or they see what the competition charges and come in lower than the competition. Both of those are bad ideas for this reason. Neither of these practices are based on reality. The better way is to set down with a certified public accountant, a professional business coach or a mentor (preferably someone who has been in business six years or longer) and discuss your financial situation from startup, if application, fixed cost, and variable cost.
There are three price options: a) High-End, Luxury ; b) Most Likely; 3) Minimum Necessary. The High End, Luxury price is the most the customer will pay for their widget. It is the High End, Luxury price. This price comes with all bells and whistles, so choose it only if you are willing to throw in a few giveaways and are willing to go that extra mile.
The Most Likely price is the most reasonable price a customer will pay for their widget. Think of it as the win-win price. You will want to make this your go-to price because it will keep your customers coming back.
The Minimum Necessary price is the lowest price a business owner can sell the widget for and still make the amount needed for their bottom line. Think of this as the “bare bones” or “final discount” price.
Not using the right pricing numbers can lead to so many other financial problems that many business owners get frustrated and simply quit. They literally give up the Struggle. These three experts can help business owners arrive at their most likely price based on “real world” situations.
Before or after you continue to read the information below, if you have any questions please click on the following link to complete this Customer Intake Sheet and email it along with your questions to [email protected]. If you would like to schedule an appointment, please provide your best time of availability after 5:00 p.m. on weekdays and all day on weekends.
LSMB Business-Coaching-Intake-Questions-Sheet
And now, back to the issues at hand… Secondly, business owners do not invest in their learning and because of that,
- Do not know how to read and understand a financial business report
Knowing how to read and more importantly financial business reports is very imperative to every successful business owner. Why? I see you are still asking those most wonderful questions!
Understanding how money flows in and out of a business and then seeing how it flows on a cash flow statement, a balance sheet, a profit/loss statement and an income statement can help a business owner really understand at a glance where the money comes into the business and where the money is going when it leaves the business.
These few reports are just a tip of the iceberg of the many reports business owners need to understand, and having this very basic knowledge will allow business owners to make informed decisions about where they are and where they want to go. Armed with this knowledge can help them to identify trends so they can make future projects and understand the ebb and flows of their business
- Failure to seek help
I was teaching a class when a lovely couple attended and stated they had been in business for eleven years previously. They were currently out of business, but in telling me their story, it made me want to cry for them. They thought they were doing very well because the were always making money, but when a friend asked them to use a financial tool, they learned they had been operating in the red for years!! They never went for help. They believed between the two of them they could handle operating a business because although they had not taken business course, they were college educated.
That has been the number one attitude of the majority of people I have ran into. They think they are smart enough to run a business without help. These people are not crazy. They are not dumb. They are smart people, in general. But, they have no idea that just as they would go to a doctor for their medical expertise, they need to go to a business expert for business expertise. Again, confidence and product knowledge are not enough to stay sustainable.
When I tell my entrepreneurial students that the going rate of failed startup businesses in Hamilton County is over 90% in five years, their eyes glaze over and shake their heads in dismay. It is not because of bad ideas or bad people. That statistic is not a concrete number that cannot be changed. Most new businesses fail because they “think they can do it on their own.”
Hiring a professional business coach, attending a reputable entrepreneurial class, finding a mentor…these all add to the success of a viable business. When reviewing the successful businesses on the other side of depressions, recessions and economic downturns, the ones who survived are the ones who created strategies to stay ahead of the game. It is hard for some to believe that there were firms who were not touched by the most recent recession, but there were businesses who did not feel the impact. Strategic positioning has to be learned from someone who is familiar with strategic planning and business concepts. This can be obtain through any of the before mentioned means and business owners do themselves and their customers a disservice when they do not use resources to gather that education.
These are just a few of many things business owners do incorrectly. Look to LSMB Business Solutions for more advice on how to strengthen your business knowledge. If you have questions, I have answers.
I come to take you higher,
Linda
