Sometimes you can’t appreciate what’s good until you shine a little light on what’s really bad.
Example: A friend who probably spends too much time thinking about these things claims that you don’t really know what a good movie is until you’ve sat through a few bad ones. He has a point. Don’t believe it? Watch The Tourist with Johnny Depp and Angelina Jolie.
The same kind of perspective can help you improve your company. Knowing what’s “bad” can either serve as a wakeup call, alerting you to what needs to improve, or provide some reassurance, showing you that you’re at least moving in the right direction.
So that said, here a five ways to screw up your growing company. Hopefully, you won’t see yourself here. But if you do, put a plan together to make some adjustments.
You Have No Business Plan
Business plans sometimes get a bad rap. They’re viewed as academic exercises, or as one-time propositions designed to please someone else – an investor, a lender, a spouse, or some other interested party.
The truth is, a serious business plan can:
- Help you explain your company’s objectives and goals to your management team, employees and recent hires
- Support your efforts to secure additional financing or investment
- Keep you on track and focus on your company’s best opportunities when the going gets a little tough
But more than anything else, a good plan forces you to think. It makes you clearly define your company’s strategies and allocates resources according to priorities that support those strategies.
You Don’t Take Personnel Matters Seriously
Two things here:
1.) Hiring. The hiring process is tough. It’s hard on employers and difficult for applicants. Unfortunately, it’s also no place to cut corners. You can potentially save a lot of aggravation later by finding the right person to begin with.
That’s easier said than always done. But you have a few things going for you. There’s still – as the economy slowly recovers – a surplus of talent out there, so you can afford to be patient when making your choice.
2.) Getting the most from your people. That doesn’t mean cracking the whip. It means putting your employees in roles and situations where they can succeed.
In his book, The Rockefeller Habits: What You Must do to Increase the Value of Your Growing Firm, management consultant Verne Harnish stresses the importance of getting “the right people doing the right things with clear accountabilities.”
Take a hard look. Are you under-utilizing your people’s talents? Is your book keeper a natural “people person” who might thrive in a sales or service role?
Your Cash Flow Management is a Mess
The amount of cash coming into your business must exceed the cash going out…or you won’t be in business for long. An easy problem to recognize, but a tough one to fix.
To get on track, first make sure everything’s in order on your end. Put effective billing procedures in place, and send invoices as soon as you can – the same day services or products are delivered, if possible. Be very careful about to whom you extend credit. If slow paying customers are a chronic problem, consider an invoice factoring arrangement, which can dramatically speed up the rate at which funds get to your account.
When searching for vendors, negotiate the best payment terms you can up front, and pay on time, not early.
For additional cash flow management tips, click here.
A successful Cleveland entrepreneur used to say that any venture he started ended up burning through twice as much cash in the first two years as he originally anticipated.
That’s not a hard and fast rule, but most accountants that work with small businesses will tell you that most entrepreneurs underestimate the amount of funds they’ll need to give their company a chance to succeed.
Being under-capitalized can force you to make difficult decisions that might not be in the best interest of your company in the long-run.
To stay out of that predicament:
- Raise all the money you reasonably can at an early stage. (This can be some combination of equity investment and loans. Your accountant can advise you.)
- Budget carefully
- Manage cash flow effectively (See above)·
You Don’t Place Enough Emphasis on Marketing
Whatever you’re selling – be it a service or product – is not so great that it will sell itself.
Well, someone had to say it.
The resources you need to invest in your company’s marketing efforts – in terms of money, time and energy – will vary depending on the industry you’re in.
The U.S. Small Business Administration has noted that a reasonable marketing budget for a growing business should be up to 10% of the year’s projected revenue, but can be more than 20% for retail-type businesses, especially in the early years of operation.
The good news is, that thanks to the shift toward Internet-based marketing efforts, it’s getting easier to figure out which components of your plan are working, and which are not.
Image Courtesy Arqueos Weiss / Wiki Commons
Does your company need to get a cash flow management plan together? MP Star Financial provides invoice factoring, purchase order financing and other alternative and asset-based lending services. Call to discuss your options with a no obligation consultation. (800) 833-3765, extension 150.