Every business owner wants to grow and expand at some point but this can be something hard to achieve if it’s not done properly. Some people may rush into making decision and therefore taking the wrong approach to how things will be managed. The thrill of starting something from scratch and seeing it grow can be exciting although it’s a long process and precautions have to be taken.
The hardest aspect for every business is growth; as this is because you have to build up your customer base and make your brand known to the public, which can be time consuming.
You might think that at the beginning your company is not doing well although when a company is formed, and there are a lot of expenses and these are not paid off immediately as you will not have a customer base, although with time you will manage to slowly start increasing your sales and from there having a profit which can then be invested back into your business.
Something that you want to avoid for your business is to have stagnant capital, meaning that you have a lot of capital or assets although you are not investing them into your business and therefore it is harder for your businesses to grow and expand.
Dropping your guard isn’t really an option during periods of growth — getting the process right, and putting practices in place to help you manage risk is essential if you’d like your company to be around in the long term. Fortunately, there are ways to help you prepare for these events that might set back your company.
Here’s four of the most common mistakes business make when expanding:
Cash flow is pivotal in a business because it gives you an overview of where your money is being invested and where your main sources of income are coming from.
Most businesses will overlook this step and this means that they will not be managing their capital properly and therefore will not be able to make good investments as they will not know where there are opportunities to invest their money in. Having a detailed cash flow will prevent you from forgetting payments and also to look out for all of the ‘hidden’ payments that a company can have such as utility bills or rent.
By having an accurate and up to date cash it will make it easier for you to notice any changes in your expenses or to pick out new opportunities of where to invest your money, and can be noticed as there would be a big return of capital on that specific section.
Employees are often the most expensive resource within a business. Sure, there’s their wages, but there also the costs of their NI, their computer, their desk and chair, etc. If you hire someone on a £25,000 salary, in total, for instance, they’re likely to cost you more towards the £35,000 mark.
Although employees can be very expensive they can also be very valuable for a business. This can be because if you consider the return on capital per employee, they should be making around 5 times the amount of money back to you and if they are a sales person they should be making around 10 times as much. Getting this part right is paramount — the worst thing you can do is to make them feel undervalued, because then they’ll leave, and your business will definitely could then feel the strain.
Not fully understanding the sheer effort needed to effectively manage a company
This might not be true for everyone although some people might be confused on how to successfully run a business day to day. Knowing every detail and all of the legislations can be hard to remember and time consuming to learn although it crucial if you want your business to succeed and expand.
It was recently reported that over a third of Britain’s smallest business owners aren’t aware of the rules of VAT, and so may be at legal risk. As many as 780,000 microbusinesses are completely in the dark about the VAT threshold, as well as their obligations to collect sales tax and report details to HMRC. The solution? Read, learn, or seek out help from a professional who knows their stuff.
When you’re starting up for the first time, it’s true that you don’t know what you don’t know. Whilst the ‘learn as you go’ philosophy can be as enriching as it can be stressful, a lack of knowledge can also be the discerning factor that causes your business to go under.
No focus on customer acquisition:
Every business owner can have good ideas although these ideas have to welcomed by their customers and sometimes this can be hard to achieve. When owning a business, you have to take into consideration that your customers are your priority and fulfilling their needs is what you have to aim for this is because without customers you wouldn’t have a company.
Your business will not last if you don’t fulfil their needs and listen to their recommendations because they are the ones using your products and services.
It’s certainly best to be knowledgeable on understanding basic principles of marketing (how will you be able to afford someone to do it for you if you aren’t bringing in any profit to start with?), and putting dedicated sales strategies in place to directly target customers.
Are you reaching your customers online, or will you need to advertise to local community members about your new shop? How will you build relationships with them, and demonstrate the value of what you’re offering? These are all huge questions, but need to be considered, and answered in the depth they deserve if you want to draw in the right people and make them loyal customers to your company.
Not having the correct investment:
Investments can be risky for small companies because you would be putting your company on the line as it can go either way. Although by making the right investments can be a huge advantage for small businesses as it could make them prosper and grow.
Different companies have different needs and you have to figure out what your business needs and what could be beneficial for you in the future. Having shareholders in a business can be advantageous as they can bring new ideas into the business as well as investing their money and making sure that the business will keep on growing and expanding.
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This post was written by Chris Beck