5 Business Traps that Every Business Owner Must Avoid
There is nothing automatic about success in business. Even if you have a great deal of automation built into your business and its processes, there are always dangers lurking around the corner.
Sometimes the traps are right there, at the foundation of the business, and others pop up later.
Regardless, here is a short list of items to avoid:
Business Trap #1 – A business that can’t “run” without you.
Let’s say you started your own business. Congratulations, you are one of the 627,000 people each year who make the jump to doing so. But how many of those 627,000 individuals actually pay close attention to scale?
Whether you own the business or the business ends up owning you often comes down to whether or not you have created a business that can succeed without you.
If you haven’t then you are likely still trading time for money; and that’s not the definition of the American dream, is it?
The real key to owning a successful business is setting up systems and processes that allow the business to run without you.
Business Trap #2 – You don’t have a business development process.
Some businesses start out of the gate with tons of business, and the owner is sent scrambling to find help to serve customers. And yes, that is a good problem to have.
But beware: if you don’t have a steady stream of new customers to replace the inevitable churn, you may find yourself OUT of business shortly.
And often this doesn’t result from demand as much as awareness. You can’t assume that your ideal customer is going to show up and buy your product or services. There is a process for acquiring customers and it is impacted by Marketing, Sales and Operations. And despite what you may be hoping for—yes—it takes money to make money. So you will need to invest budget in the process of acquiring customers to overcome churn. Neglect this, and you may be out of business soon. And the statistics bare this out. More than 595,000 businesses close each year. Now, not all of that is caused by a lack of income due to a failed business development system, but you can be sure many are.
Business Trap #3 – Failing to recognize industry trends.
The invention of the light bulb didn’t exactly do wonders for the candle industry. Nor did the invention of the automobile stabilize the horse and carriage industry. It’s true there are some industries that are harder to disrupt than others. Remember when navigational devices like the Garmin and the TomTom seemed like a sure thing, until the iPhone (and other smartphones) made Maps software ubiquitous?
A business owner doesn’t need to constantly look over the shoulder. But when industry trends—and possible disruptions—present themselves, it’s best not to ignore them.
Being able to adapt your business to the coming trends is always better than being too late to the game. In the mid-2000s, book publishers that embraced the trend of digital platforms and eBooks did better than those who held out and therefore failed to monetize the digital publishing market.
Business Trap #4 – You fail to watch cashflow.
Simply put, cash flow problems can force business owners into bad decisions. Cash flow measures the ability of the company to pay its bills. The cash balance is the cash received minus the cash paid out during the time period. This is where things can get tricky with cash flow management.
Up to 82% of business failures are due to poor cash management. A myriad of business strategies can affect (and also be affected) by cash flow. Pricing, hiring necessary personnel, and spending are all factors that impact cash flow.
Having cash flow problems makes it harder to take advantage of opportunities that come your way.
Business Trap #5 – You still bootstrap when it’s time to finance.
Perhaps you have been a cash-strapped business thus far. You only spend what you take home in profit. And many times, that is the wise decision. But there is a point at which the ability to grow to the next level can only come with funding or financing.
True story: One business owner started a company that seven years later gave him a $4 million exit. He never borrowed money for that business. The entire seven years was spent bootstrapping. With his next company, his team of advisors told him it would actually be hard for him to have a more successful exit without infusing more cash into his business. After two rounds of 7-figure funding, he was able to grow the value of his new business to more than $15 million in less than two years.
So you’re ready to look at financing for your business but you aren’t sure of the right next step?
Let us help you.
Envision Finance Corporation looks beyond the transaction and focuses on building partnerships to ensure success and longevity with everyone. Envision Finance Corporation is a Veteran owned and operated, group of passionate individuals devoted to finding small, medium, and large businesses’ financing for equipment and working capital. With Envision, you’ll find transparency and integrity, and benefit from knowledgeable and efficient processes to get your business the capital it needs to grow and thrive.
Envision works with funding sources across the nation and vendors in virtually every industry. We find solutions for your financing needs. No one works harder for you than we do.
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