Being a small fish in a big pond is scary and exhilarating, and competing with big companies as a small business has unique challenges. Not only will you have less financial prowess, but you often have to be more creative to capture your share of the target market. However, even with fewer resources, you can still succeed with grit and a plan. Succeeding as a small business isn’t just about great marketing and a cool product. You also need to know what pitfalls to avoid falling into. Here are some of the biggest things small companies need to avoid in order to thrive.
If you build an amazing company, but if you don’t have good leadership, the people won’t come — and neither will the profits. On the employee side, it’s worth noting that most departing staff say they’re leaving a bad manager, not the company. In fact, 65 percent of employees
would rather get a new manager than a pay raise. Not only can poor leadership cause a lot of employee turnover, but ineffective leadership can translate to chaos in the overall direction of your company. Invest in good hires at all levels.
Bad Customer Service
Customer service isn’t just about being polite to your consumers. It’s also about delivering on what your customers actually want and need. Are you taking surveys and accepting customer feedback? More importantly, are you implementing necessary changes? Bad customer service will kill your business. Address any issues that surface from your clients, whether it be from an online form or face-to-face feedback. Do a gut check on a regular basis and ask yourself if you’re delivering on your promises.
Financial Management Woes
Small businesses live and breathe by their finances as much as, if not more than, their larger counterparts. Get familiar right away with essential financial cornerstones such as balance sheets, income statements and revenue forecasts. Use QuickBooks Online or FreshBooks to establish healthy financial management. Only hire new staff when you have the revenue secured to pay for their salary.
Lack of Differentiation
A small business must stand out in the marketplace, especially because they may be up against bigger fish. The first step of any small business must be to identify their value proposition
and a way to articulate it. Your value proposition is the unique service you offer consumers. What are you offering that no one else is? If you can’t answer that question, your business won’t catch anyone’s attention.
No Working Capital
Working capital reflects your company’s short-term financial health and long-term prospects. Your working capital is equal to your current assets minus your current liabilities. As you start out in your industry, you may need to investigate the prospect of a working capital loan. A ratio of 1.2 to 2
is generally considered to be adequate net working capital. A ratio that’s higher indicates you have a negative working capital, and a ratio lower than one indicates a negative amount of capital.
Making it as a small business is possible. While most small businesses don’t turn a profit right away, you can set yourself up for success by creating a smart financial plan and putting it in the hands of effective and experienced leadership. So go ahead, determine your value proposition, take care of your customers and start growing!
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