Succeeding as an entrepreneur isn’t an easy task. It takes a mountain of work. Only those with truly strong passion survive. Even still, many of those business owners make significant mistakes that cost them a lot of money. Knowing how to avoid these mistakes can often be the difference between making a decent profit and going into the red. With this in mind, here are some financial follies your company should let go of.
Overstaffing Your Business
When you’re on a tight budget, you shouldn’t be overstaffed. Only hire the amount of people that you actually need. If certain roles seem like they can be combined and performed by only one employee instead of two, then they probably can. Basically, eliminate positions that don’t need to exist. It may be tough to let some people go, but it’s important to think about how extra employees affecting your company financially. Other than providing a good or service to the public, your company’s objective is to make a profit and retaining employees you don’t need won’t help with that.
Not Managing Your Online Reputation
Another common folly these days is being completely oblivious to your online reputation and PR. Today, anyone can Google a business in a matter of seconds on their phone and pull up scores of reviews. If your reviews say bad things and provide your business with low ratings, it can quickly sink your sales and give all of your business to your better rated competitors. You can track your online reputation via Yelp, Google Analytics and other tools that are available to you on the internet. However, it would probably be in your best interest to employ a social media expert who know how to use those tools and market your company to improve your ratings. Companies that don’t do that usually tend to have a harder time staying afloat.
Taking on Too Much Debt
Most business owners didn’t start out independently wealthy. They had to borrow money from banks and other lenders to get their companies started. However, you shouldn’t make borrowing a habit. Interest from debt can become a serious liability for a company. If you take on too much debt, you may even be forced into bankruptcy and have to close your doors. Pay off your debt early and fund your company through its own revenue. If you get into a situation where you cannot pay it off, make sure that you talk to a business debt collection lawyer to see what exactly your options are.
Relying on Inefficient Processes
One thing that can certainly be a drag on profitability is inefficiency. Inefficient processes could be costing you a lot in ways you aren’t even aware of. For example, according to a study, retailers lose more than $42 billion each year to shrinkage. However, with proper inventory management software, most of that waste could be avoided.
Investing in Pricey Real Estate Early On
One thing that kills many companies is investing in expensive commercial real estate before their business idea has proven profitable in the market. The lease or mortgage may be more than what they can handle with their meager revenue in the early days. Instead, choose more modest locations for your business and only upgrade when you have already achieved a level of success that can afford such accommodations. One thing that you can do that is along these lines is to rent the space you’ll be using until your company has grown to the point where purchasing your own location would be both profitable and reasonable.
Being an entrepreneur is one of the most difficult things that a person can pursue. Still, the possible upside is nearly infinite. There are plenty of true rags to riches stories about small businesses that later expanded into huge national brands, like Google and Facebook. However, make sure to avoid some of the common mistakes many new business owners make and to seek what is profitable first. If you do, you’ll certainly increase your chances of succeeding.