How to Avoid Business Demise

Most entrepreneurs and business owners learn how to run their organization by diving in and learning as they go. However, this might be harmful in the long run.

It’s easy to make the following mistakes when you simply don’t have the experience needed to avoid them. But there is something working in your favor: you can learn from the experience of other entrepreneurs who have gone before.

As an entrepreneur, you will have your own style of conducting business. But there are certain, basic practices you should follow and others that should definitely be avoided.

Don't Pay Yourself Too Much

Sure, this is your business. So you might think that all the profits that come in are yours. You can do what you like with them. But paying yourself too much can cause resentment in the other people who have helped you set up the business, such as business partners or employees who are getting less than they think they deserve.

Plus, there’s something to be said for pouring the profits back into the business so that it grows and flourishes.

Don't Let Growth Catch You by Surprise

People think that growth is always good for a business. However, there are times when unexpected growth can cause a negative reaction. Let’s say that you run a restaurant. Maybe you have a steady stream of customers coming in during the day and enough waiters and cooks to handle the load.

But maybe your restaurant quickly becomes popular because a celebrity dines there or a famous critic gives a rave review. Suddenly, people start calling for more reservations until you have reached capacity and don't have enough staff to meet the demands. Stress and overwhelm envelope your employees causing them to quit and look for other employment.  

Obviously, this doesn’t mean that you should not encourage growth in your business but it is imperative that you have systems in place that can easily expand when sudden growth arises.

Don't Neglect the Needs of Good Talent

A high employee turnover rate is bad for business. Let’s consider the above example again. Maybe you run a restaurant, but you can’t get any employees to stay. At the most, they stay for 2-3 months and then you’re left looking for someone new.

This means that certain customers, who became attached to the wait staff because of great customer service will now look to dine at other establishments. This means they’ll end up feeling disgruntled and may stop coming to the restaurant altogether. Or maybe they’ll come less often due to lack of customer service.

Furthermore, when there is high turnover, the odds of attracting new, qualified talent becomes slim. Not only will you have to train new people all over again but they may still not perform up to your expectations.

Make sure you’re paying your employees what they deserve and giving them a good work environment if you want to keep them. Tools to establish a great company culture, offering benefits, and implementing systems that help them do their job and keep your business operating smoothly will retain your great team and keep them happy and engaged. 

Never Forget the Bottom Line

There are many aspects of running a business — marketing, sales, accounting, HR, administration, etc. An entrepreneur has to get involved in doing all of these. But you should remember that what matters first and foremost is the bottom line. Are you turning a profit? If so, how much? And if you are, is it enough?

If there’s hardly any difference between the money coming in and the money going out, you need to sit down and think about whether you can cut costs or how you can increase sales? Diversifying your offerings and out-sourcing operational systems that you do not have the expertise or man power to uphold are some things you can put in place that can make a large impact.

Don't Fall Short with Business Planning

In order to start a business, crafting a sound business plan is a must. Consider including the following components:

1. How many employees are necessary to run your business?
2. Where will you run your business? What will your rent be? Will it cost to decorate your office, or renovate the space?
3. Does your marketing plan include an effective website, blog and social media pages?
4. Where will you source raw materials? How much will it cost to make your product? How much will you sell it for? What will be your ROI?

A sound business plan gives you a starting point, helping you communicate to investors if need be, and offering a broad scope to see the path your business growth can take. Entrepreneurship can be fun and rewarding when good systems, vision, and plans are put in place.

Be sure to check out Platinum Group's Webinar page for webinar recordings and new events in our Human Capital Management and Business Enrichment Webinar Series. This free webinar series features local and statewide professional experts offering valuable insight into successful business practices.

Platinum Group is a full service human capital management (HCM) resource that allows businesses to manage their payroll, benefits compliance, track time and attendance and other various human resources functions in a way that maximizes efficiency and eliminates redundancies with the platform, iSolved. For more information about Platinum Group or to schedule a demo of iSolved please visit our website.