NatWest Business Builder: The Importance of Mindset
Even the savviest of businesses can face stumbling blocks along the way – here’s how to get over them.
From being resistant to change to taking employees for granted, we look at some of the most common business habits you need to break.
1. Not planning for growth
According to Dr Lucy Gill-Simmen, lecturer in marketing at Royal Holloway, University of London: “The old cliché is true that if you’re failing to plan then you’re planning to fail. No small business can afford to do without creating a proper, clear business plan – then when the company is up and running, an equally clear marketing plan.” Have a strategic approach to growth – set targets that are achievable and realistic, have a time frame to reach those targets, and put in place three- and five-year plans (or whatever best suits your business). The details will vary from company to company – but the mistake many SMEs make is to have no clear plan at all.
2. Not focusing on cash flow
A key cause of start-up failure is the cash running out at a critical moment – research suggests it’s the second-biggest reason why a business fails, after lack of demand for the product. To stave off cash worries, develop a head for figures; cash-flow projections and forecasting should become second nature. If they’re not, don’t risk losing the business because of a cash crisis – have someone on the team who’s good with figures, or entrust your finances to a trusted external accountant right from the start.
3. Not making the customer central to the business
As a successful SME, it’s a mistake to think your core business is selling a product or service. What you’re actually doing is meeting a customer expectation. Focusing exclusively on the thing you sell means you can quickly lose customers. “Map the customer journey and ensure you have plans in place to support every step of that,” says Chris Daly, chief executive at the Chartered Institute of Marketing. “That journey starts much earlier than many people realise and extends far beyond pressing the ‘buy’ button or delivering the product.” One bad habit many SMEs routinely fall into is focusing on finding new customers rather than retaining existing ones. “It costs far more to get a new customer than it does to generate repeat business,” Daly says.
4. Not delegating
As a start-up, you may well be a one-person band to begin with, only taking on employees as you grow. But your success as an individual can lead to an unwillingness to let go and delegate effectively. “As an entrepreneur, you’re an independent person by nature,” says Francis Toye, CEO at Unilink Group, a leading UK secure software provider for the criminal justice market. “But this means you can be something of a control freak. For a business to grow, you have to enable others to do things.” And, Toye adds, you have to be genuine about this. “It’s not simply about giving other people tasks, it’s about explaining the issue, then giving people ownership of certain areas. It involves giving them real situations and the responsibility to resolve them – if you hang on to the responsibility, you’re not really delegating.”
5. Doing what you’ve always done
When companies mature, the temptation can be to stick to what you know best. But failing to innovate is another key reason for business failure. The photography pioneer Kodak brought itself to the verge of bankruptcy by refusing to move into digital photography, while more agile competitors saw the near-universal shift in consumer preference for digital over film. A culture of innovation can be hard to foster, but remember that not all innovation has to be the previously unheard-of ‘big idea’. Innovation can be small but beautiful – for instance, tweaks to an existing successful product or small add-ons in customer satisfaction.
“As an entrepreneur, you’re an independent person by nature. But this means you can be something of a control freak. For a business to grow, you have to enable others to do things”
Francis Toye, CEO, Unilink Group
6. Competing on price
You can always cut your prices – but it’s very hard to put them up. Once you’ve put a price in place, you fix a perceived value for your product or service that can be difficult to change in the minds of your customers. Instead, find ways of creating value that aren’t dependent on price. Think of something unique that you offer and emphasise that. Do you have a bespoke element to your product? If so, price accordingly. Or offer good service and after-sales service, or create an experience. Ultimately, believing that you have to be ultra-competitive and as cheap as Tesco or Amazon is a recipe for business failure.
7. Not valuing your employees
Another business cliché is that your employees are your best asset. Again, it’s only a cliché because it’s true. Make the most of your staff – an employee who’s willing to go on training courses, for example, is likely to become a successful, productive and profitable member of the team. If you stifle these ambitions for cost reasons, the good employee will go elsewhere. Bear this in mind when you’re recruiting. “Look for passion,” says Alessandra Sollberger, CEO and founder at health supplements company Evermore. “When recruiting, you’ll spot the people who will be good to take things on and spread magic dust in the business.”
8. Not keeping up with regulations
Red tape is the bane of any SME’s working life, but it’s worth keeping up to date with new regulations that affect you for two reasons. First, they can be an opportunity – for instance, the General Data Protection Regulation (GDPR) is, according to Chris Daly, “an opportunity to clean and clarify your data in such a way you can personalise the strength of the relationship between the customer and the business”. Second, the penalties and the potential damage to your brand from not being legislatively compliant can be severe. Take the recent example of gaming firm William Hill Group, currently facing a package of fines of at least £6.2m as a result of failing to meet its anti-money laundering and social responsibility regulations. It’s a risk you don’t want to take.
Further Reading
- Five laws of disruptive business thinking
- How to create the right mood
- SME Tools: how to be productive
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