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If I Only Knew Then… Pitfalls to Avoid (Part 2)
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By Emily McHugh
Last month I listed three points to keep in mind when starting a business, however, these points hold true regardless of the stage you are in business. They were: 1) know and ask for exactly what you want; 2) do your own homework and think for yourself; and 3) think big from day one.
In the previous article, I made somewhat of a fuss about the importance of setting up a good bookkeeping system from the onset. But better yet, outsource your bookkeeping ASAP, just like you would your payroll. Many times we have the tendency to think that the only purpose for keeping ones books is to file taxes. Good bookkeeping is important because it provides you, the business owner, with critical information to guide your decision making process. How do you know if you are truly profitable, if your prices are correct, if you are adequately covering your costs, or if your advertising is working, if you do not have a system in place where you can quantifiably assess what is going on at all times? Being “busy” in all aspects of our business does not necessarily mean we can keep abreast of all the details. But it is the details that ultimately help determine our success. The more we become familiar and comfortable with our books, the better we will run our businesses.
There was a time, not too long ago, when financial statements made nominal sense to me, regardless of how many classes I took, the main reason being there was not a context to appreciate the information. Now, with my own business, my financial statements serve as a reference point by which to ascertain what we have done in the past, and the likelihood of what could transpire in the future.
Here are three more “If I Only Knew Then…” points:
1) Don’t extend credit!
Always ask for upfront payment. If the answer is no or you cannot negotiate on the terms, at least ask, or try to negotiate terms in your favor. There may be vendors whose policies may not allow this accommodation, but you would be amazed how many people will pay upfront if you only ask. Do not automatically assume upfront payment is out of the question. The faster funds are you in your pocket, the faster you can grow your business, and the less debt you are likely to incur. In order to facilitate being paid upfront, consider accepting credit cards. They can do wonders for cash flow and more than make up for the discount fees. They can also increase your sales because the easier you make it for someone to pay you the more likely they are to buy from you.
2) Hone your sales strategy
It can take a good while to properly figure out your market. There are so many nuances and subtleties that linger with every opportunity that it is imperative to have a clear understanding of where the true opportunities are. Always seek the low-hanging fruit. It is not always obvious, but most of the time, it is “dip your buckets where you are” (as my mother regularly reminds me). Once you have figured out your market by listening to what your customers are asking for, start focusing on how to get your product to your customer. The distribution strategy is the ultimate component in the sales strategy that dictates how fast you can grow. Understand the fundamentals of what it takes to distribute your product effectively and plan a strategy that will accomplish the goal.
3) Be prepared to walk away
Avoid desperation at all costs! You have no bargaining power when you are desperate. The sooner the entrepreneur learns to avoid anxiety and desperation, the more time and energy she/he will have for more profitable endeavors. Many of the things we spend a lot of time worrying about, such as getting financing, increasing sales and the like, are normal components of doing business. Get used to it, learn to manage it, and stop worrying about it. Only do business with people who share your values and ethical standards. Therefore, select very carefully your business associates and avoid unnecessary entanglements and partners wherever possible. Always ask for and check references, there is no substitute for due diligence.
Mini-Bio: Emily McHugh is the CEO and founder of Casauri — where style & technology click! Visit online at www.casauri.com or email Emily at: mchugh@casauri.com.
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