While the true failure rate of businesses varies across industries and types of businesses, it is understood that a certain percentage of businesses do not last past certain limits depending on how you are measuring the metric. However, we can look at businesses that did not make it to understand the mistakes they made so we can avoid them in our own businesses. Below, we look at some mistakes that can break your business so you can avoid them.
Being Busy but Not Productive
In many cases, being busy can be an indicator of being productive, but in lots of cases, it is not. If you are busy doing things that will not produce income or a positive effect on your business, you are making a mistake.
A good example is businesses that do not have an ideal client in mind so they set up meetings with everyone they can, hoping to land some business. This is incredibly wasteful in terms of both time and money. It can be difficult to hear that while you are busy you are not being productive, but this is a lesson to focus your efforts on what is important for the growth and success of your business.
Not Defining Your Ideal Client
When doing market research and starting a business, one of the first things you do is define your ideal client. This is the person or people who you will target and sell to. If you do not have an ideal client in mind, other important things like product development and formulating marketing strategies will be a waste of time and money. Not having an ideal client will also save you countless hours because you will not be sitting in meetings that do not produce value as we saw above. For instance, KnownHost’s best clients are those interested in quality hosting.
When defining your ideal client, be as specific as possible while allowing room for adjustment. For example, instead of selling skin care products to women, sell skincare products to women over 40 who are concerned about aging and the appearance of wrinkles. Such a definition will help you also shape your marketing language and messaging, help you define your branding better, and allow for better targeting when you start working on your marketing strategy.
Not Having a Contract
Contracts are very important for both your business and your clients. A contract spells out the terms of your engagement, from the cost of the project and payment terms to the scope and duration of the engagement.
If a client wants you to do more, they will have to pay more and have the terms adjusted according to the contract you already have in place. Also, any allowance for additional work will be billed differently, either hourly or whatever is standard in your industry and business.
All of the above also apply to businesses that supply physical products. Never get into a business engagement without a contract. Check out what is required where you live and abide by those rules.
Some jurisdictions allow digital contracts that are signed by both parties and dated. Some require a physical signature, and you might need to fax or mail the contract over.
Having a contract is one of the best financial tips when starting a business or engaging with clients because it eliminates all misunderstandings and sets clear the terms of your engagement. It also enables you to not incur additional costs providing goods and services that you will not be adequately compensated for.
Not Setting Boundaries
Every entrepreneur wants their business to succeed. However, a problem arises when their work and personal life start mixing. Yes, there are entrepreneurs who like working late into the night and on the weekends. However, doing so does not leave much room for anything else in their lives.
Because of how much it takes to keep a business running, stress and burnout are both serious concerns. Every entrepreneur should take some time to relax and recharge so they can be at their best when working on the business.
Setting boundaries can help you establish a boundary between your work and personal life so that you have some time to do so. Boundaries also help when dealing with clients. If you do not define clear terms for the scope of the projects they want you to work on, you might find them pushing for more work without additional pay. Setting boundaries in these cases saves everyone time and eliminates misunderstandings because all parties know the roles they have to play.
Not Being Stern on Invoice Payments
This mostly affects freelancers and new small businesses. You need to be paid, and your business needs revenue and resources to keep running. While there are clients who will pay on time without prompt, some take advantage of the situation and only pay when you ask. Your business might suffer cash flow issues if you are not stern about collecting overdue invoices, and this is something that can break it.
Without set processes and boundaries, entrepreneurs increase the likelihood of their businesses failing. We have looked at some of the mistakes that can break a business so start by avoiding these and find other areas of improvement in your business to help it thrive.