A thriving business goes beyond landing a few customers, working on your customer retention strategies, and employing a few people. Running your own company is hard. Most people fail at it because it presents so many intricate problems regarding finance, business model, product management, and managing people. It’s easy to overlook or whitewash issues emerging from these main areas. “White washing” refers to actions that “feel good” or are relatively easy to do, like throwing money at an issue or saying “the market isn’t ready”.
A new coat of paint is not going to fix an old house; it’s about fixing the real issues.
In an era of steep competition, saturated markets, and government bureaucracy, what are the few things that a business owner should always guard against?
Companies may fail due to some unique circumstances or simply, bad luck. Maybe the economy crashed (hey, dot com bust) or consumers simply weren’t ready (Palm Pilots). However there are common pitfalls to avoid as you’re building your business.
Too many customers
“There’s such a thing as too many customers?” Yes, it’s a thing.
There’s a principle termed the Pareto Principle that all business owners should be acquainted with. The theory states it’s usually 20 percent of your efforts that leads to 80 percent of your results. 20 percent of your customers are actually responsible for your main business; focus on them. Think of you can cater and fix your product directly to them. List out your types of customers and weigh how valuable they are, how much they compose of your entire customer base, and how much they contribute to your general revenue. If tiny channels of your customers are causing you indecision and taking up significant time, drop them. Focus on the customers that make up the majority of your base—and that make doing business easy.
C-Suite or business owners pay themselves too much
You work hard for your money; you got guts starting your own company; everything is all on you, every day. Why not pay yourself handsomely? After all, you deserve it…right? This depends. If you’re company is growing and stabilizing, it totally makes sense to reward yourself for a job well done. If your company is struggling to make ends meet, it’s time to examine whether you can afford to be bringing home such a huge paycheck. If you hire people, a business owner is responsible that their livelihoods are taken into account as well. You’re not blowing “company money” if you’re buckling down to make sure you have the best talent in-house to move your company forward. If that means taking a pay cut, do so. If you’ve taken investment from a bank or a venture capital, think of something: unless you’re profitable, every cent comes out of your runway. Having C-Suite level founders or business owners taking paychecks when a startup is failing shows poor judgement.
When CEOs or business owners pay themselves too much, it could just mean the end is going to come faster. Case study: 8020, a media company that hired a CEO who formerly worked at Conde Nast. His $500,000 salary meant the end for the struggling business.
Pay C-Suite or business owners too little
It’s difficult to focus on building a great company when a person is stressed about money, food, bills, and housing. If a business owner can’t afford to live, they will not be able to pay enough attention to moving their company forward. They’ll be figuring out how to pay for their kids’ schools or the grocery bill. Make salary reasonable, even if you feel you have to curb it a bit. You can pay yourself more later. However it’s important to pay enough to make yourself breather a bit.
Your product and/or service is not that special
You may have a cute nail salon or a really great UX design on your coaching site, but at the end of the day, why would a potential customer chose you over everyone else? Is it because you give excellent customer service, like Nordstrom? Or are you the cheapest in the industry and you attract bargain hunters? Answers like “Our website is really beautiful”, “our customers really like our sales guy”, or “we’re premium” may be true, but at the end of day, they will not sustain a business nor set it up to thrive.
In economics and marketing, product differentiation is the “process of distinguishing a product or service from others”. Position your product in a particular place in a customer’s mind. If you can’t beat competitors in features, think of how you can position your product in the marketplace. Do this by telling a unique story about your service. Laser focus on particular group of people (fire customers), or provide impeccable service.
Running your own business is a challenge; it’s good to understand the biggest and most common mistakes a business owner does as they navigate the too-often turbulent waters.
Fortunately, business owners trust Shore to support them along the way.
At Shore, we streamline the entire process of managing a business.
We handle the daily, so you can focus on the grind.
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