Avoid these Top 5 Small Business Mistakes That Suppress Profits!

Today's post will provide actionable business strategies and tactics for Executives and Business Owners of service-based industries to avoid major small business mistakes.

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Small Business Mistakes That Suppress Profits

You learned a lot about how to “do” business activities in business school. But you learned barely anything about how to MANAGE your small business. And most training courses and rainmaker events are just as useless.

So it’s no surprise that so many owners have trouble managing their company, and that many find themselves miserable, overworked, stressed out, and strapped for cash.

Countless solo owners, just like you, are struggling to run and grow their business. Much of the time, it’s because they’re making some critical errors.

In this post, we highlight five of the most common mistakes. Are you guilty of any of them?

No Business Plan

1) Are you running your business without a documented plan?

Would you encourage one of your clients, friends, or family to invest in a business being run by someone who doesn’t have a plan for how their business is meant to serve its buyers, customers, clients, audience, etc., and make a profit for the owners?

Probably not.

Why are you running your own business this way?

All things being equal, ANY business that puts a business plan—or even a one-page strategic plan—into action will have a stronger foundation and be more profitable. Most importantly, it will be less vulnerable and capable of weathering the storm when times get bad.

Good news: your plan doesn’t need to be hundreds of pages long, include a financial proforma, and take months to create. What it does need to include are the 11 basic areas of a business.

  1. Clarity of offer
  2. Specialization/Ideal Target
  3. How you will attack your ideal buyers
  4. How you will attract your ideal buyers
  5. How you will nurture leads into buyers
  6. How you will manage profit
  7. Your system to close deals and onboard buyers
  8. How you will deliver your offer at a high quality, consistently for more profit
  9. How you’ll automate in your business
  10. The process to manage operations
  11. How you’ll lead your business and team

None of these are terribly complicated to map out and improve. But if you ignore, forget or allow an area to fall out of alignment, the negative impacts will begin to surface.

Don’t continue to run your business without a plan.

Marketing Suppressing Profits Your Business

2) Is marketing suppressing profits in your business? (Too much of a good thing…can be bad.)

Imagine you win a prize. A lifetime supply of apricots.

Great! You’ll save lots of money. Except you loathe apricots. Then how do you feel about your prize? Not great….

That’s exactly what happens to businesses that don’t invest time in understanding their ideal buyers. You’re not only sinking, you’re beneath a pile of never-ending apricots.

Answer these 3 questions:

What is a good/bad client or buyer for your business? If you don’t answer this question, your marketing investment is bringing you great results that are meant for someone who likes apricots, but not you.

How many clients/customers can your “factory” handle at any given time? If you’re not careful, growth can kill you. You can potentially overwhelm your business’ ability to produce the work promptly and to the standards you need to be known for to be successful. Most businesses never reach their potential because of this mistake.

When do you plan on taking a vacation?

Typical answers: When I don’t have to be there every day, week, month. Your marketing/growth strategy should start with the question of “When do you plan on resting to recharge your batteries?” If you don’t, you will be trapped by your business.

Great marketing has ruined many marriages in this way. Plan your life, strategize your business and marketing to serve that life, and then use marketing to bring your ideal buyers in the right quantity. A simple but winning formula!

Are You The Reason People Work With You

3) Is your personality—”you”—the reason people want to work with your business?

You’re taking the easy way out to build your business and your marketing on you and your great personality. You end up damaging your team’s ability to carry on the marketing and business without you being there day in and day out.

If all the prospects want you because you’re so great, then what good is the team you’ve built? And what does that kind of strategy mean to you when you decide to step away from your business for any reason. Good or bad.

Don’t be lured by the power of personality. Yes, it makes it easier to close deals but there must be a legitimate reason for the prospect to work with or buy from you.

Strategic Pricing

4) Are you strategically pricing that which your business offers or are you guessing?

Too many businesses ask us to provide feedback on their pricing model because they’re guessing.

If you’re a service business, think in terms of services of your business, not “your” services.

It’s not about you or your ego. When you think objectively, it’s relatively simple.

There are 4 common approaches:

The first, copy others. Simply charge what everyone else is charging. Which is a BAD approach and reveals your poor planning and low value.

The second is strategic. How much do you want your business to gross? How many projects or clients is your business equipped to handle in a year? Divide the first and the second and, you’ll have your fee per buyer. If you charge per hour, simply divide the average buyer number by the number of hours the average delivery/fulfillment takes and you have your hourly rate. This isn’t perfect, but it’s better than copying your competitors.

Third is to decide how much you want to net. Double that to get your gross goals. Then divide by the number of productive, billable hours you intend to sell and you have a very, very rough idea of what your billable rate should be. Keep in mind this approach diminishes pretty quickly if you leverage lower-level team members and other staff, technology, checklists, procedures, or systems to make yourself more efficient.

The fourth is value. The least common, and yet the best approach to pricing for both you and the buyer. Have a base number for fee/price then do the planning and calculations to deliver at least a 3X return on investment. Believe me, the world is full of smart people who get “value” and will be happy to do business with someone who offers to provide 3 dollars in exchange for 1 dollar.

Stop guessing.

Does Your Business Make You Happy

5) Does your business make you happy or does it make you miserable?

It’s true, a happy business typically makes more money than one that isn’t. Most business owners mistakenly think it’s because the business is making more money than most. They think that’s why they’re so happy.

Typically, it’s the opposite. We see this with our clients in our Business Advantage program. The reason they make more money than their competitors is because they learned how to build a business that makes them happy.

Businesses that makes the leaders/owner happy also tend to be more profitable. Because the things that make it fun to run a business… a marketing plan that brings plenty of quality buyers, a system to educate and convert those prospective clients into paying clients, a well-planned delivery process so more work coming in doesn’t just mean more apologies back at home, a well-trained and well-paid team who thrive in an environment of policies, procedures, checklists and systems, and financial controls, so you know what’s actually happening in your business and can reliably predict and plan for the future. These are the factors that contribute to a business owner having the tools and resources and freedom to really make an impact on your community.

That makes most owners and executives happy.

Running your business this way also makes it a more profitable business. That’s why happy owners really do make more money.

Are you happy?

Cheers!
Peter

P.S. Picture Uhuru Network as an outside Chief Marketing Officer (CMO) service exclusively for businesses looking to scale up their revenue. If you run a business and are serious about growing, making more money, and having fun in the process, we can help.

Our Business Advantage program is designed to implement systems of common growth patterns and address challenges that hold most businesses back.

Schedule a free strategy session below.

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