You have to know them the same way I know them (after I have failed in several) because if you don’t do something to avoid them, you will see how your business will break down until a moment comes when it will disintegrate.
Yes. It’s crude, but it’s reality.
Shall we start?
Come on, these are the 7 mistakes that will make your business fail:
1. Failure to carry out adequate budgetary and management planning and control
Every day more, and especially in these increasingly turbulent and uncertain days, you need to constantly monitor the performance of your business through effective management control. This involves several steps:
- Planning and carrying out budgets that allow you to anticipate the future .
- Follow-up and monitoring of the most important variables of your business to guarantee that what you said you were going to do, you are doing .
- Implementation of corrective measures that allow you to return to your path if you have abandoned it.
2. Use the money from your business for your personal use
- Taking money out of your business till to spend it is one of the biggest mistakes you can make.
- Your business is your business.
- And you are you.
- You must have a checking account for your business and a different one for you . In your business account you must have collected the income and expenses of your business. Just from your business. And you can manage transfers from your business to your personal account for certain matters but never for current payments.
- Separating your accounts is essential.
3. Not controlling your waste
Your processes and activities cannot use more resources than strictly necessary . You incur waste when you produce too much, you have more inventory than you need, you spend too much to transport your products, you have too many quality problems that make you have to repeat the process or service.
Even, speaking of services, when you spend too much time on a certain service.
And beware of this: poor time management, of your time, is vital to ensure that you are not wasting the greatest asset you have in your business. You.
Also Read: How To Grow Your Business?
4. Invest too much in Assets
An asset, thus, in short, is a good that you need to be able to produce your products or services. If you invest in having the latest technological innovation just for the sake of having it, you are wasting resources , because you are reducing your liquidity and your ability to meet other needs just on a whim.
And here is your head the most important thing.
Do not fool yourself.
You don’t need the latest iPhone model, as much as you want it.
5. Not knowing your balance point
Your break even point is that sales volume that allows you to start earning money . If you have very low margins or very high fixed costs, you have to sell a lot of volume in order to break even and start making money from there.
You have to know this impasse , since if you are in a business where it is difficult for you to reach that sales volume, it is very likely that you will regularly generate losses instead of profits.
6. Badly manage your funds
We are going to separate two concepts here:
- Own funds (the euros that you put into your business)
- External funds (the euros you borrow for your business)
The question is simple: if what you pay for the funds is more than what you get for them: BAD BUSINESS.
7. Badly manage your level of indebtedness and liquidity
If you ask for money in the short term to pay for things in the long term (that is, if you ask for a line of credit to pay for an investment, for example), or to buy stock, it is very likely that your business will end up in ruin.
And I’m telling you the truth. By experience.
It is very important that you take into account your real sales capacity, without triumphalism and that you use current income to pay current expenses . Just as you should not make large investments by borrowing but by using your resources .
Those generated by your business year after year: reinvesting your profits in your business.
Life is cycles and business too. It is very likely that you will go through lean seasons, for which you need to manage an emergency fund that will allow you to overcome these periods. That is why it is so important to have your level of indebtedness controlled, because the bank will always ask you to pay.
I’ll tell you a secret: Something very similar to what happens in the stock market usually happens in the market for finished products: the smartest, who see the arrival of the recession or drop in demand in time, sell their stock as soon as possible. and cancel their debts with those sales . And those furthest behind are left with their stock and their debts.
Also Read: 3 Keys To Having A Successful Business