Who’s your boss? Time? Money? Fear? Confusion?
Time to take the reins! You want to be totally independent – to be in charge – but you find yourself spending way too much time with wheels spinning. You feel you are so close to having it figured out, but there are nagging concerns and questions. Googling just brings more confusion. So you put off making a decision or addressing a problem.
Meanwhile, that dream of quitting the day job, or at least getting to a point where you can afford some help so you don’t have to work 80 hours a week, seems so close and yet so far.
There are many things that business owner’s need to conquer. Some things are minor bumps. Some issues are real “deal breakers” in the long term. The more frightening part is that some of your early decisions and operational ideas don’t seem to be a problem at start up. Then over time, as they remain in your daily operation, they keep you from ever having a profit let alone an independent life as a business owner. Months can go by and you are still walking on the wrong path.
I have identified some of the more “hidden” costs to your success. The first two are tied for first place. I honestly can’t separate these two.
1. You don’t know how to price your product or service.
You can lose money with every single transaction if you haven’t done the math.
My biggest concern is for my community of artists and makers: please don’t think that selling online at some price that you guessed at or “borrowed” from another online seller is making you a profit. I cringe at almost every single price I see on Etsy. Pricing is simple math, but it seems to be ignored by the vast majority of Etsy sellers. Plus, it’s a race to the bottom and with imports allowed in the mix now. A truly handcrafted item has very little chance of being profitable on that site. (You can do better than that site – much better.)
Other businesses can fall victim to guesstimates or price wars, too. If you are running a hair salon, you still need to do math. Maybe your competitor down the street who is charging half as much OR twice as much has justified their math: price per square foot on the lease, number of chairs they can keep filled, reputation, etc. You can’t compete only on price if that price will not bring you a profit. Don’t sign a lease until you do the math. How many hours a week can you keep booked? Is that enough at the current rates? Be realistic!
1. You don’t have a business plan…
…and/or you don’t have a marketing plan. You are NOT following the “path of least resistance” and feel like you need to reinvent the wheel. You don’t know the rules and methodologies that are the backbone of successful businesses. Or, as I have seen too many times, the rules are ignored because the new start up thinks they have a “different” kind of business. Trust me: Every business in every industry has some basic easy-to-use formulas for success.
You don’t need a gazillion pages of stuff for planning. You need to think about where you want to go and what might stand in your way and how to overcome pitfalls. You need to find your target market and learn how to reach them. (I am developing a check list. Keep an eye out for that to become available soon.)
Bottom line: Before you start spending money and time, invest in pen and paper. Do some brainstorming, researching, and ask the tough questions. This exercise might save you many thousands of dollars and countless lost hours. However, remember: Google is your friend and your enemy! Read this post on “How to Learn”
2. You are tied to “subsidies” – is free rent really free?
Even if you have achieved the sales needed to make a “decent living”, you may still be depending on some “outside” help that could keep you from growing. Are you working out of your home? Can your business grow to the next level without moving your operation? Are your teenage kids “helping” out? What happens when they need to “quit” working for you?
For many, having a home office or workspace in a garage can work just fine. That model works for me (for now) as a consultant. Skype lets me hold “in person” meetings around the world. However, many reading this will begrudgingly admit that having a “nearly free” workspace is confining business opportunities for growth.
The extra costs of a separate space might pay for themselves in extra volume, being able to increase storage capacity, or having room to add equipment that lowers your labor costs.
For some, there is the added benefit of being able to work without “home” distractions. That might make you much more productive. Of course, costs must be measured and long-term advantages need to show themselves.
For some reading this, it might be a no-brainer. Start planning (financially) to make that move!
3. You don’t spend on the things that will “save” you money.
This is somewhat of a corollary to #2: if you are overwhelmed by bills and mounting expenses, the very things you need to invest in to reduce your bills and expenses are “out of reach” financially. That’s a catch-22 to avoid!
However, if you still have some wiggle room financially, then get a calculator. You might need to consider investing in your business.
It’s simple math: Let’s say you make 20 widgets a day that produce $10 in direct profit or a total of $200 a day. You learn about a machine that would allow you to make 100 widgets a day and costs $1000. How long would it take to pay off that initial expense? Not long, right? But, if you bought a machine that only doubled your production to 40 and cost 10 times more – $10,000 – you might want to hit pause. This is a very long-term investment and to make that work, you would certainly want to know you had customers lined up to buy every single widget and that your business will still be around long enough to pay for this contraption!
However, if you feel certain that you can sell into new markets and territories or have had to turn away business from a large retailer who wants your stuff, then even that slow ROI (return on investment) expense might be justifiable. Talk to your tax professional, too. A big expense on a tool or machinery might help with your tax liability, too.
Speaking of Tax Professionals….
I recently consulted a small craft studio owner who was just about to sign up for her first wholesale trade event. With travel expenses and other costs, this was going to run her in the neighborhood of $5000 to attend. In the first 10 mins of our discussion, she learned that she had not priced her items properly (would have lost money on every sale she made!) AND that she had created far too many different items in her line for her to be able to keep up with orders. She instantly signed up for 3 more consultations. The money she spends on my consultations will save her making costly mistakes as she grows her business.
While that might seem like a self-serving example, I hope you get the big picture. If you need a professional for taxes, car repairs or whatever, you might also need professional services to make sure your business fundamentals are in place, too. You want to seek out people with many years of experience and lots of testimonials from real people. One hour with someone who knows YOUR industry might pay you back a hundred times over. I saved my client $5000 plus whatever losses she would have had if she had made any sales. She may still sign-up. But not until I am done with her! LOL!
Sometimes that hour with a consultant is spent just discovering that you are on the right track! That peace of mind is priceless.
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And please share this with your network. You might save a friend from some serious mistakes!
Wondering about something in your business right now?