In our daily lives, we learn from our mistakes. When we do something and realize it isn’t good, we try to avoid it from happening again by not repeating the same decisions. The good thing about it is that we don’t lose much; we learn something from it.
On the other hand, running a small business isn’t the same. When you make a mistake, you’d most likely lose money. The worst part? The business could go bankrupt. Poor business decisions could lead to serious financial and legal issues for the company and affect your family’s lifestyle.
When we run small businesses, we want them to be successful. For us to have a successful company, we’ll need to analyze situations and factors that could affect the results of our decisions.
If you’re running a small business, particularly in the retail and eCommerce sectors, this article will help you. We’ve gathered five common mistakes you should avoid when starting a small business.
Investing Too Much Money Too Soon
Running a small business can help you in the future. When you have a company, you’ll be able to earn for your family and have an opportunity to make it bigger. You can pass the business on to your children when it becomes successful.
However, when you start a business, you should never put in too much money. Whether you got your funds from an inheritance, lottery, or credit from the bank, you should not go all out.
Let’s say you borrowed money from the bank to run your retail store. You’ll use the funds to lease a building or office, materials, stocks, and more. Aside from those, the payment terms would strain your company’s expenses.
If your company didn’t get much profit in its first months, you’d most likely face some financial and legal implications as you have problems with the bank.
One of the best solutions is to save money for your business. Your savings will be a good start. If you’re thinking of adding a loan from the bank to make the investment bigger, then you’re wrong. It’s best to stick to your savings. When your retail shop starts to gain profit, this is the perfect time to put in more funds.
As a bonus tip, we recommend having an online platform for your retail shop so people from other places can access it and buy your products.
So make sure to invest a reasonable amount taking into account the potential impacts of different types of inflation. Establish an emergency fund for you and your family that can cover your six-month expenses.
Not Developing a Detailed Business Plan
A business plan is an integral part of a company. Without it, everything could fall apart, and your business won’t have a sense of direction. You wouldn’t know where to start and what your goal is. Even though your company has a goal, you must create a plan to achieve it.
So, what should be in your business plan?
You first need to determine the amount of money you need to run it for the next few months. You have to anticipate that your shop won’t run as smoothly as you want. This means you could face less profit than you expected. If you’re not ready for it, a huge financial problem could arise. Risk management is essential for all companies. Creating a risk management system will help you deal with financial risks.
Of course, you want to ensure that people will buy your products, so you must determine your customers. Doing this will help you create a better marketing strategy, as you already know your target consumers.
For example, you’re selling clothes for kids. You can create a marketing plan perfect for kids and parents; posters, websites, Facebook ads, and many more are some of your great choices to reach your target customers.
You also need to identify the number of people you’d hire. Make sure that it is manageable but not too small. Designate the tasks as reasonably as possible to ensure productivity within the organization.
Finally, you should identify your company’s strengths and weaknesses. You can make the strengths more powerful, and the weaknesses become assets in the future by making critical strategies that would help you in the business.
For instance, one of your company’s weaknesses is the location. You can rent a better, more convenient place for everyone or create a website where people can buy your goods. They won’t need to travel to your store, making it more convenient for them.
Creating a plan will help you secure your company’s financial flow.
Not Keeping Track of Cash
Since we’re discussing financial mistakes, remember that cash or budget is your business’s life. Without it, you won’t be able to run your company, let alone start it. Startup money is imperative when starting a business, so we’ve mentioned above to prepare a reasonable amount to keep the business running for a few months.
However, the problem arises when you don’t keep track of it. Although we want to focus on the profit, we should also monitor how much we have put into the business.
Understanding the cash flow of your business is a critical metric. Make sure to keep records of everything so you’d quickly know how much you’ve spent on something or whether you’re gaining or losing.
Let’s say you didn’t record yesterday’s expenditures and sales. The main question is how much you earned yesterday. However, the bigger problem is whether you made a profit or a loss.
It’s best to record everything and keep them organized. Aside from a physical copy of all the transactions, you can also save a digital copy on your computer or cloud-based technology. We recommend the latter because this gives you access even though you’re at home.
Undercharging for Your Services
When getting customers for your retail or eCommerce business, giving out huge discounts could be one of the most effective ways. You’ll have plenty of people buying from your shops because they think they are getting a great deal. However, this is only best during the launching phase of the business itself.
You can also use this strategy when introducing a new product. For instance, you want to sell a new item. You can include free samples from the highly sold products in your stores. That’ll give a good chance for the new item to become more visible to your new and existing customers.
When it comes to slashing prices, as mentioned, this is only good for the introductory phase. If you continuously offer discounts on most of your products, you’d get lower profit, and it would also be challenging to raise prices in the future as your existing customers are accustomed to it. In the worst-case scenario, you’d lose some of them.
Remember that you don’t need to lower your prices to attract customers. Although it could help, make sure to offer reasonable pricing. Aside from the cost, give them the quality they have paid for.
If you want to attract more customers, creating effective marketing strategies is critical. You can create posters, content, use Google Ads, and many more.
For example, you can write blogs on your website using the right keywords. It’s a perfect opportunity to show your expertise in the industry, allowing you to gain the trust of your target audience. Most people would love to buy and use products that offer value for their money.
Not Hiring the Right People with the Right Expertise
According to an article from Bloomberg, more than 50% of businesses will fail and close in the future. It has been more challenging for businesses to start since the CoVid-19 pandemic started. One of the main reasons for business failures is the employees’ lack the expertise.
When hiring employees, you must ensure they are equipped with the basic knowledge of the products and services you offer. Let’s say you want to buy a car. Would you buy from someone who doesn’t know anything about it? Of course, not!
When a consumer asks for information about a certain item you sell, your employee should be able to give the details. Whether the transaction happens online or at a physical store, giving your customers the answers is critical.
They should also be familiar with your company’s policies to avoid conflicts later—for example, your business’ refund policy or delivery schedule.
If you see an applicant with the potential to excel, you can provide adequate training to maximize their capability and become more productive as your company grows.
Hiring the right people will ensure your company’s growth as they save time for your customers and, at the same time, help you learn new techniques in approaching your target consumers. You’d be able to create better marketing strategies for them.
Sum Up
Whether you are planning to start a small retail or eCommerce business or already running one, make sure you avoid committing any of the above mistakes. Remember not to put in all your money, track your business’s cash flow, create a business plan, create various marketing strategies, and hire the right people.
Following the tips above would surely avoid financial and legal implications on your business, ensuring your company’s growth.
