Contrary to popular belief, small businesses do have decent success rates. The U.S. Bureau of Labor Statistics reports that nearly 50 percent of new businesses are still open after five years. To further your odds of being among them, avoid the three common pitfalls that cause small business owners to lose money:
Accounting: Don’t Try This at Home
Many small business owners make the mistake of taking on the responsibilities of bookkeeping and accounting—tracking income, reducing that by expenses and assessing net profit or loss—by themselves. Strong owners know the importance of digging deeper into their numbers and assessing the profitability of each customer or project. By only looking at your financial statements as a whole, you will not know what is succeeding and what is not, what is worth your time and what you should scrap. Did you spend too much money marketing, did you charge the right prices, were your production costs too high?
Getting this information requires a close account of your expenses. Hire a knowledgeable tax advisor, someone who goes beyond simply processing your taxes. This will help you get a system in place to track the data going forward. Though of course, if and when you do turn a profit, make sure you pay your taxes—the last thing you want to do as a small and growing business is to get into a long and expensive disagreement with the IRS or the CRA.
Failure to Train & Use Tools
Referencing hard data as well as anecdotes, the author of the book “Selling with Noble Purpose,” Lisa Earle McLeod, found that salespeople who have a sense of purpose outperform salespeople who are purely quota-driven. Spend some time with your managers and salespeople to craft the answer to the question: “How will this customer be different as a result of doing business with us?” and motivate your sales associates to see customers as the people they are.
Your employees cannot be trained properly without having data to assess where they are in comparison to their goals. Once you have your purpose defined, use a software solution that tracks and analyzes sales performance data and provides tools to forecast sales. Some analytics companies even offer employee scorecards to target future sales opportunities.
Ignoring Your Online Reputation
Take a step back and create a “big picture” marketing plan that incorporates reputation management and social media marketing. Nearly 90 percent of people reading online reviews are influenced by them, according to Zendesk. You may miss out on potential business without building out an interactive online presence.
Your website is a good place to start, but pay attention to your social networks as well. Use social media to direct business back to your website, where users can find information about your brand and services. Use other free or low-cost marketing avenues including electronic newsletters and postcards in bulk mailers to continue interacting with your customer base. However, don’t make the mistake of measuring your success by simply tallying the response to one-off campaigns or coupons. Instead, use your data to calculate a return on investment for each tactic and determine which is the most effective for your audience. Having this information will help you tighten up your expenditures and continue to be more profitable.
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