Sam Makad is a business consultant. He helps small & medium enterprises to grow their businesses and overall ROI. You can follow Sam on Twitter, Facebook, and Linkedin.
Running a local company is not easy. As a business owner, you need to plan the strategy of your business to ensure that you have protected yourself and your business financially and legally.
Almost everybody knows about successful local business owners in their locations. You might have heard about big companies spending millions of dollars buying small and local companies. This might tempt you to start a local company of your own.
However, even though this might sound easy, running local companies takes a lot of commitment, hard work, and a lot of resources. There are times when your company will perform well, while other times, you might find yourself in trouble due to mistakes.
Successful entrepreneurs are not afraid of making mistakes when running their local companies. Instead, they research to find ways of avoiding these mistakes. Others learn from their own mistakes.
Here are some common mistakes business owners make when running a local company;
1. Failure to focus on profits and cash flow
One of the most common mistakes business owners make when running a local company is failure to focus on profits and cash flow. If you talk to the most successful local company owners, they will tell you that math is essential when running a company.
Unfortunately, most entrepreneurs start their companies due to different interests. They do not look at the numbers the way they should. Getting a closer look at the numbers is very important since it helps you understand the profitability of your business.
You should also look at the expenses to see what your company spends money on. According to research by Shopify, small companies spend about $40,000 in expenses in the first year after being launched. You might shut down your company if you do not check these numbers.
These might be rough estimates. However, you should ensure that you have done your math well. This helps you understand what to do and how to run your company. Focusing on profits and cash flow is essential for the success of your local company.
2. Failure to create a marketing plan
When starting a local company, one of the things that you need to create is a business plan. If you fail to create one, then forget about running your company successfully. Apart from the business plan, you also need a marketing plan when running your company.
How do you expect to sell your products and services if the local or international community does not know anything about your business? Creating a marketing plan allows you to create and identify customer personals.
It also helps you to know about your customers. With a marketing plan, you can find ways to impress these customers and convince them to buy from you. This gives you an edge over your customers.
A marketing plan also helps you find ways through which you can measure the success of your company. This is essential in helping you change the things that might not be working.
3. Unnecessary spending
A large number of local companies do not meet their expectations since they do not know how to control their spending. If you want your local company to succeed, you should avoid unnecessary spending to ensure that you can keep a consistent record of your profits.
The first thing to do to avoid unnecessary spending is to look for budget busters. Things such as retail or office spaces that are too expensive or large are not necessary. More equipment or employees that you do not need are not important.
In addition, you need to be careful about your debts. This is where local company owners fail when running their companies. It is important to note that every debt or loan you take will need to be repaid. You need to ensure that you are making profits even when paying debts.
4. Hanging on to a 'DIY' approach instead of using tried-and-true systems
As discussed above, running a local company is not as easy as some people might think. As the company owner, you have to make sure that your company has all the resources needed to make it successful.
Unfortunately, most local companies run under strict budgets. This forces them to rely on cheap solutions for their processes. Others hang on to DIY approaches instead of using tried and true systems. This is a recipe for failure.
For instance, running a local brewery, you need to ensure that all beer processes are handled efficiently. Instead of manually managing your brewing processes, you can choose Ollie, a brewery software that helps you focus on the things that matter.
According to Ollie’s CEO, Ryan Wilson, brewery companies using Ollie spend less time shuffling between orders. Most of their time is spent servicing customer relationships. The product's approach is to get beers that meet customer requirements.
Running a local company does not mean you will realize profits immediately after starting your business. As someone once said, Rome was not built in one day. It will take a lot of time, effort, and resources for you to succeed.
You might not realize any profits when your local company is young. You might even face a lot of challenges in the first few years to the point where you might want to give up. So what can you do to ensure that your local business is successful?
Patience is an essential virtue for all entrepreneurs. You need to ensure that you are prepared for anything that might be thrown your way. Be patient and handle everything professionally. In addition, ensure that you have financial reserves to support your company.
6. Forming the wrong company entities
This process might take place when starting a local company or after you have already started. Some entrepreneurs decide to start their companies and then form a company entity later. Others form an entity faster in a bid to start running their companies as fast as possible.
Some settle on a business entity, such as an LLC (Limited Liability Company), simply because they know about a successful local company that is an LLC. However, failure to set up a business entity and choosing the wrong one is a mistake and can affect your company.
For instance, forming a general partnership means that you will be personally liable for your company's debts. These include debts you did not even agree to. Forming a corporation means you will have to pay taxes at a personal and corporate level.
If you want to avoid this mistake, ensure that you have done enough research about all business entities available in your region. You can also consult a financial or legal professional to ensure that your chosen entity is good for your company.
7. Poor pricing of products and services
Poor pricing of products and services is one of the easiest ways for entrepreneurs to either lose money or chase away customers. It will be difficult for your local company to break even if you underprice your products.
Local companies tend to underprice their products and services in a bid to sell more and beat their competitors. Others do that due to failure to do enough market research and determine the amount of money they are supposed to charge for their products. This is a mistake and might mean you will not be able to cover your expenses.
Other local companies might also overprice their products. Ensure that you have regulated your pricing if you are selling a unique product, especially those without alternatives. Overpricing your products will push your customers to your competitors.
8. Lack of written agreements
When running a company, you will enter into many agreements with business partners, customers, shareholders, state agencies, and employees, among many others. Lack of written agreements with all these people and agencies is a common mistake for local companies.
It might be a customer agreement, corporate bylaws, operating agreements for LLCs, or partnership agreements. No matter the type of agreement your company is getting into, you should ensure that you have signed a written agreement.
If you have partners, for instance, ensure that the agreement you sign explains the responsibilities and rights of all the partners that you have. It should also talk about the steps to take when one partner leaves the company.
Most local companies do not do this. The partners assume that since they know each other, they do not need to get into a written agreement since they can solve any issues easily. This is a mistake and should be avoided at all costs.
9. Failure to get insurance
Some local companies operate under strict budgets. They try to eliminate costs that might make things expensive. This leads some of them into thinking that insurance is not necessary for them.
Other entrepreneurs assume that since they have set up a business entity and limited their liabilities for the obligations of their companies, they do not need company insurance. However, this is not true.
What do you think would happen if, for instance, an employee is involved in an accident with a company vehicle, someone gets injured in the office, the company is sued for poor products, or you are accused of malpractice?
If you find your company in any of these issues, you might have to spend a lot of money. This can affect both your personal and company finances. It is, therefore, important to ensure that you have company insurance.
10. Intellectual property protection
Depending on what your local company does or produces, you might need to protect intellectual property. If, for instance, you produce things such as software, music, artwork, or inventions, you might need a patent or copyright protection.
In addition, things such as your business logo and name are eligible for federal or state trademark protection. You might also need copyright protection. This is important to ensure that other companies and competitors do not use your company for their benefit.
Suppose your local company is successful and you have not protected all these things. In that case, you might find yourself in a situation where competitors use a similar business name or logo to confuse your customers. This might affect your company negatively in many ways.
11. Selling many products
One of the most common mistakes with local companies is trying to sell every other product. Some entrepreneurs assume that since a particular product does not sell as expected, they should get more products to attract customers.
For instance, let us assume that you are running a local company that deals with recliner sofas. Since customers are not buying these sofas and you have some money, you decide to ask for more sofas.
At the end of the day, you will have many products in your company. Instead, you need to look at your branding. For instance, is your branding about sofas in general or recliner sofas to be specific?
If you want to attract customers, ensure that your branding shows what your company is selling. If you deal with recliner sofas, your branding should attract customers interested in recliner sofas. Build a strong brand that convinces customers to buy from you.
12. Failure to hire or hiring the wrong talent
Doing everything on their own is a common mistake among local company owners. They fail to realize that they consume a lot of time handling small tasks. This time can be spent taking care of core business tasks.
Things such as paperwork, minor menial tasks, and small errands can be handled by someone else. If you are not an accountant, you can outsource accounting services to a professional company. You can also build a team to help you run the company.
Another mistake is hiring the wrong talent. The hiring process is not as complicated as some entrepreneurs think. Technology has made it easy, especially with applicant tracking systems that allow you to do background checks on potential employees.
If you make the wrong hires, you will affect the performance of your company. Your employees will not meet your expectations, and your company might not beat the competition from other companies.
13. Failure to stick to company budget
Imagine a situation where you have been running your local company well for many years. You have made profits and invested back into the business. However, you get complacent and stop sticking to your company budget.
When this happens, you will find yourself running out of money. This might affect the operations of your local company since you will not have enough funds to cover your operational expenses. It is, therefore, important to stick to your company's budget.
Successful entrepreneurs are not afraid of mistakes when running their local companies. However, they are bright enough to avoid committing the common mistakes discussed above. Before starting your company, ensure that you have set the right strategy to help you avoid the common mistakes business owners make when running a local company.
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