So how do you go about avoiding disastrous mistakes early on in business? Let’s touch on just the second part of those common mistakes below. If you missed the first part of this blog, you can read more here.
#4 Revisit your Long-Term Strategy at least annually
You can’t run a business without knowing where you are taking it. Your strategy drives everything you do. You should always be asking yourself with every business decision, does this align with my strategy? Strategic plans are not something that you do one time either. Strategies can change over time and therefore it is important to revisit the plan at least once a year to see if anything needs to change, and to ensure your entire team is aligned.
Budgets should be built from your short-term strategy, but every company should have at least a 3 year higher level strategic plan. This plan should include a vision for the company to follow, a financial plan, a marketing plan, and an operational plan. Even better, the leaders in these key areas should work with you to build the plan so everyone is aligned on where the company is headed.
#5 Don’t take advantage of automation or try to automate too much
Sure, systems are costly. However, there are different levels of systems depending on the size of your business and what you need it for. I wouldn’t recommend a start up with one operating entity to implement SAP for their accounting, for example. You don’t need to start out with a Cadillac. A Chevy will be just fine. Utilizing systems at the right stages through your growth can help you streamline processes which will save time and money for everyone.
At the other end of the spectrum, don’t build out a bunch of systems that don’t talk to each other. If you have a sales order system, an inventory control and logistics management system, and an accounting system that don’t all talk to one another, your ability to do business efficiently and get timely and accurate financial statements will be hampered dramatically. As you add systems, invest in good interfaces, but do so with as little customization as possible so ongoing maintenance is easier and less expensive.
Heavy customization of systems is generally a risk. Software changes are made frequently. If you have to re-write customized software code every time you do an upgrade on your system, you are ensuring a costly and time-consuming future for yourself.
#6 Growing too rapidly
So, after 5 years in business you have proven your concept is extremely successful in your current market. Therefore, next year you want to expand to five new markets, or better yet, go global. Slow down! Entering new markets means all kinds of challenges, and how do you know the experience you had in the current market will completely replicate in a new one?
The first and most likely problem you’ll have is overextending your staff. Sure, your current team are all rock stars, but if you have to do five new markets all at the same time, they can’t be everywhere at once. If you spread the team too thin you have to supplement with new people, and then you introduce the challenge of project management.
Second, each market, whether it be in the states, or in other countries, has different regulatory constraints. Before you enter a new market, you should be educated on what those are and how to navigate them. It’s very possible some regulations may prevent your business model from being profitable in that market.
Third, expanding too rapidly could put pressure on your available cash, especially if it has a high capital expenditure at entry. How long will it take you to ramp up to your expected revenue level long term? Do you want to fund the growth organically with cash flow from operations, or do you want to raise funds to cover the growth? Knowing how much you’ll need, and having a cushion for surprises will be key to planning for a successful expansion.
In general, you need to make sure you have a solid foundation of efficient processes, solid leadership, and a well thought out plan before you expand.
#7 Take your eye off the competition
Regardless if you are a well-established product company focusing on brand strategy vs. cost competitiveness, or you are a completely new concept that no one else is doing yet, you need to keep your eye on the competition. You either need to do one of two things…1) stay ahead with innovation, or 2) beat them out with a more valuable product/service. If you don’t keep a finger on the pulse of your competition, you may not be able to maintain market share for long.
Let’s say you are a new concept, what do you do if a copycat comes along? What will your strategy be? If you are constantly monitoring your competition you can address this question. Otherwise your competition may surpass you and you won’t know it’s happened until it’s too late. Catching back up from behind is much more costly than staying ahead.
In the end, there are thousands of companies that have paved the road you are on. Regardless of whether your idea is new or not, running a business involves common key elements that all businesses need. Don’t work harder, work smarter.
Learn from those who have already made mistakes and, if anything, make new mistakes instead! If you have any questions or need help establishing a strong foundation for your business, contact 9Gauge Partners today.