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Pitfalls to Avoid

Robert Craven reveals the top 10 issues that inhibit the growth of a business

 

Far too many owners of smaller businesses complain.  They complain endlessly and they complain endlessly about the same things: the overheads, the staff, banks, customers, suppliers. It really gets rather boring…, listening to them spew forth about how dreadful their lives are. 

Advice: If running your own business is so dreadful then go and get yourself a job.

Meantime, it seems worthwhile to explain the ten key issues for the owner-manager/director of a small, growing business. We, at The Directors’ Centre, spend most of our time helping growing businesses to break through a glass ceiling that seems to be self-imposed by the thinking of the owners and directors of the business.

The top ten list of issues that inhibit the growth of the business are pretty much as follows:

1. Not enough profit
2. Not enough sales/customers
3. Poor marketing strategy/knowledge
4. Inconsistent operational performance
5. Can’t find good people – depend on the few
6. Lack of money/cash
7. Lack of systems
8. Owners are technical not strategic
9. Lack of vision and purpose
10. Depends too much on the owner

1.  Not Enough Profit!

Not enough profit means that you are not selling your products for a high enough price (and maybe you are not buying it cheaply enough).  Most people new to business seem happy to talk about everything but profit and yet profit is the key issue. No profit means no wages means no mortgage repayments.

Not enough profit means you are a busy fool – you don’t sell enough at the right price.  And if you are chasing sales do not reduce your prices, this rips money away from profit and is an almost certain road to bankruptcy – you must understand the relationship between changes in cost-profit-volumes – I can supply you with a chart to explain it, so email me at rc@thedc.co.uk
Fact: You are in business to make a profit, even if you don’t want to talk about it!

2.  Not Enough Sales/Customers

If you have not got enough customers it is for one of two reasons: either you have a lousy product or alternatively you are lousy at marketing (or maybe a combination of the two).  The market is brutally honest and will not buy your product unless it looks like it will work.  Most of us fail to see the product through the customers’ eyes.
Question: Why would anyone want to buy your product when there are plenty of other similar products that are probably cheaper and easier to use?

3.  Poor Marketing Strategy/Knowledge

Customers pay your wages. You need to understand how to get them to buy from you – without them you are lost. 
Opinion: if you don’t like selling or there’s no-one who’s any good at it in your business then you might as well give up right now.

4.  Inconsistent Operational Performance

There’s nothing that irritates a customer more than getting erratic service – and most small businesses are past masters at giving erratic service.  Without clear systems in place then you are constantly re-inventing the wheel and there is no way that you can guarantee any sense of a consistent high quality service that will amaze your customers.

5.  Can’t Find Good People – Depend On The Few

The people issue never goes away - and I find it difficult to know what to say.    Without the right people working for you – people you trust and respect – you will never be able to move onwards and upwards.
Opinion: If you are employing the wrong people then you must get rid of them (and ideally, you do this legally!).

6.  Lack Of Money/Cash

Talk to any banker of any failed businessperson and the common thread of ex-businesses is that they run out of cash – cash to pay the wages, the suppliers, the boss and family. 
Fact: Cash is the lifeline of any business and without it the business cannot operate.

7.  Lack Of Systems

Most people set up in business to get away from the systems, processes and bureaucracy you find when working in a larger company.  Ironically, as you grow, the one thing that you need more than anything else is systems, processes and some form of bureaucracy! 

Systemise everything you can, and I mean everything – seek out the best way of doing most everything and make that the official way to open the shop, check the cash, deal with complaints, send out the post, negotiate the price. And if you do find a better way of doing something then it becomes the new system. And if you come across a new occurrence and you have to think about what to do then that can be added to your book of systems. 
Thought: If systemising everything is good enough for McDonald’s then I am sure it will be good enough for you.

8.  Owners Are Technical Not Strategic

Too many owners are too much in love with their product, spend too much time literally ‘in’ the business and don’t step back to work ‘on’ the business. It is very exciting to be at the heart of the business but your very strength as the person who is more passionate and more committed ultimately disables the people around you. When Ray Kroc set up McDonald’s he focused on designing its shape and architecture and not on flipping burgers.
Advice: Spend time guiding and shaping the future direction of the business

9.  Lack Of Vision And Purpose

As the saying goes, ‘if you don’t know where you are going then any road will do!’. It stands to reason that you must have absolute clarity about what you are trying to do (and what you are not trying to do) with your business.  More importantly, everyone in the business needs to know .
Advice: As Brian Tracy comments, ‘Failing to plan is planning to fail’!

10.  Depends Too Much On The Owner

Most owners are addicted to urgency – they think that the business must revolve around them. They believe that the mobile phone ringing all the time is a good sign – it makes them think that they are alive and needed.  This addiction to urgency is bad news.  The best way to grow a business is to have one that is not dependent on the boss – if the business depends too much on you then you will never be able to go on holiday or even leave the work premises without wondering if it is all OK.
Advice: Make yourself redundant

 

So What?

You need to get the business to work for you and not have you working for the business. 

Most new owner-managers see themselves as the next Branson or Roddick, when, in fact, their new business venture is the beginning of the end.  Their new business is not the beginning of true financial freedom (as it so often promises to be); their new business is the beginning of the end, the first nails in the coffin, as they become dependent on staff suppliers and customers. 

Advice: Knowing the pitfalls that most other business people fall into should enable you to avoid them.  Take action, fast, before its too late.

 

 

About THE AUTHOR

Robert Craven is a keynote speaker and author of the business best-sellers 'Kick-Start Your Business' and 'Customer Is King'. He has recently been described as 'one of the UK’s leading marketing specialists' and the 'entrepreneurship guru'. He runs The Directors’ Centre, helping growing businesses to grow.
For further information, contact Robert Craven on 01225 851044. (rc@directorscentre.com) www.directorscentre.com

©Robert Craven, Making Money, 2006

publication details

First published in Making Money, May 2006