Although people found companies and small businesses in good faith, the road to profit is ridden with peril. Not all of the franchises make their way up the top because they are toppled by various pitfalls that they simply do not see coming. These tend to repeat themselves, so if you are a prospective businessman, it is more than useful to know what the 5 common pitfalls are, so you could timely avoid them before they ruin your business as well.
Civil wars have been known to destroy entire states over the course of history and things are not much different in the world of business. In fact, even a small argument could spell disaster for your company. If two heads of department don’t get well together, their bickering could endanger the entire structure of the company. That is why the owners, the managers, and the workers all need to be made aware that they are all on the same page here! The end goal is profit and the company’s growth, so all other personal or professional differences can wait for after-hours to be resolved peacefully.
Even if you are a start-up, you have to have sufficient funds for doing business without a hitch. Starting a company means that it’s all in poker terms, so don’t be stingy when it comes to the initial investment. There are numerous financial processes that need cash to go smoothly, from paying creditors, all the way to employees’ salaries. The capital you own is important because at first, you are not going to be making a lot of money, so the firm will basically run on the money you decide to invest from day one.
Monitor the cash flow and if you notice that you are running out of money, you can always ask the bank for a loan or even better, organize a fundraiser if you are engaged in any sort of non-profit activities. Finally, you can always find an investor like yourself that will help you get through the tough times by investing his or her money for a share of the company in the stock exchange.
Not growing fast enough
When it comes to expanding your business, the keyword is balance. You must ensure that your company grows constantly because any period of stagnation would mean falling behind competitors. On the other side, you have to thwart potential overgrowth that might bring down the entire enterprise. This desired balance can be achieved only by assuming a proactive role.
For instance, if you experience a deficit in the workforce that is preventing you from delivering the orders in time, you can always outsource outside the borders of your country. If you turn to the best immigration agents in the area, they will provide you with enough skilled workers in no time and the best thing is: they probably won’t ask for competitive salaries straight away. This is just one example of how resourceful and flexible you have to be when it comes to actively influencing the growth of your company.
The biggest danger any start-up faces, apart from their product or service not succeeding in the market, is over-dependency. They usually have one big client they work for and when they back down, the start-up is left with zero income overnight. The same thing can happen if the company relies too much on the skills of a particular employee and then when he or she leaves, they are left with a huge gap in terms of human resources. That is why diversifying the clientele and centering the company around a team of people, rather than a single individual, is the best way to go. Always strive not to depend on other people and companies but solely on your own skills and resources.
Failing to plan for contingency funds
One thing that every entrepreneur must be aware of is the fact that unplanned events will occur, whether they are prepared for them or not. This can be a big problem if your company is unprepared and doesn’t have extra cash to repair the photocopier or pay last year’s taxes that just popped up in the records, for example. If you create a contingency budget that should amount up to 20% of the initial investment then you needn’t worry. Being prepared is a huge plus in the world of big business.
These are the 5 most common pitfalls your company is likely to face but the list is by no means exhaustive. That is why it is important to learn as you go and recognize other potential pitfalls in time to react.