Does your business require more and more investment to stay afloat? If so, you need to know this is abnormal and the situation needs to be corrected. Businesses are different, but problems are the same. They do not always consist of the fact that the product is terrible. We will tell you about the three most frequent mistakes, because of which your business does not bring money.
3 Frequent mistakes of entrepreneurs
1. You believe that all business money is yours.
Entrepreneurs often live with the opinion “I equal business, the company’s cash equals my wallet.” If they want to take a vacation — they take money from the company cash register. When It is necessary to refuel the car — they again steal from the cash register. Entrepreneurs think they are owners, so they can do it easily without any doubt. It is incorrect! It is one of the most common mistakes of entrepreneurs!
The money that you have in the box office or your account is not yours. If you work on prepayment, it could be customers’ money. You are already spending them, although your commitment has not yet been fulfilled. For example, you make sites have paid an advance payment, and after that, a client changes his opinion and ask for money back. There is nothing to return.
2. You chase sales prospects
The concept of profit is one of the subjects in high school in social studies classes. Entrepreneurs, for sure, forget about it — and evaluate their business success by the amount of money in the account. Indeed, it is easier to calculate it than make a profit. However, they cannot say anything about the effectiveness of the work.
For example, an entrepreneur sold 300 belts per month with an average sum — 3,000 dollars. Multiply these numbers and get $900,000. After that, he will deduct the purchase price to the maximum. $300,000 left. Seems to be OK. If you subtract the salaries of sellers, transport the goods, rent the premises, marketing costs, taxes, you will not get $300 000. You would get minus $50 000.
3. Every action in business needs to be evaluated through the prism of profit.
There are no good or bad management decisions. There can be profitable and unprofitable. Unfortunately, entrepreneurs do not calculate the effect that their actions bring.
Do you want to increase conversion? Make a sales funnel and see how much revenue and profit this will give eventually. Want to automate business processes? Estimate how much time will be released from your employees. Then think about whether this time can be spent with more profit. For example, you have a store with one cashier, who on average serves one customer in 30 seconds. You have automated sales, and then the cashier spends 15 seconds on the buyer. But is there any sense in this? If there is a queue in the store, then yes. People will stop being nervous and leave; there will be more sales. Next step is to calculate how much more money and when this gain will pay back automation.
If there were no queues, then automation won’t bring any benefit. Is that the cashier will sit idle. However, the key decisions in which you invest time and money — it is necessary.
What can say in conclusion?
The primary indicator that business is effective is not the number of actions, but profit. Every step should be profitable. So, you need to evaluate each action regarding how it increased profit.