Obviously you can’t go back for a do-over, but you can certainly learn from your mistakes as well as all our successes. Most challenges you have are not unique to your business.
In the interests of helping you work smarter and last longer, I would like to offer my top ten list of key resource drains to avoid in early businesses and startups, based on my years of advising entrepreneurs and my own business experience:
1. Expanding your product line too quickly for scaling.
It’s always tempting to think that more product variations will satisfy more customers and lead to new sales. The problem is that more SKUs dramatically increases complexity and cost, when you can least afford it.
My advice is to focus and sell more of what you do best, rather than adding new things.
2. Buy too much inventory too soon to get unit costs down.
Inventory is a balancing act, but I see too much inventory much more often than too little.
Unit costs are important, but don’t forget about the cash flow hit, extra storage costs, and the probability of obsolete inventory due to necessary updates or pivots. Use multiple small orders at first.
3. Lack of attention to team and process productivity.
Some chaos is normal in every new business, but many wait far too long before they install metrics based on “best practices,” and fail to attack obvious bottlenecks with a vengeance. You may be the main problem, insisting on making every decision, and hiring cheap helpers rather than help.
4. Poor communication and visibility from the top.
As the business operation and the team grows, regular and effective communication from key personnel is critical. New businesses often burn excessive resources working on the wrong things, or doing things the wrong way. Daily updates from the top and documented processes are critical.
5. People with the wrong tools or no training.
As your business starts to scale, you can’t do everything manually anymore. Make sure people have the right tools, and know how to use them, for accounting, inventory tracking, and planning.
Too often I see businesses of some size still using spreadsheets for inventory, or post-it notes for problem tracking.
6. Measuring time worked rather than business results.
It’s no secret that some people are more productive than others, due to skills, training, or commitment. We all know team members who work long hours, but are short on measurable output. Be sure to attach employee bonuses and even overtime opportunities to measurable business results.
7. Ineffective and expensive marketing campaigns.
The most cost-effective marketing approaches have changed; from catalogs to web sites, and from television commercials to social media. Yet I still see expense budgets based on traditional channels, with no strict metrics on cost of customer acquisition by channel, or lifetime customer value.
8. Excessive support and return activities.
Support-intensive products and high return rates can sink even the best run business. Support costs and return rates need to be regularly benchmarked against industry norms, and aggressive root cause analysis done to isolate the problem. Excessive resources required in this area are rarely recognized.
9. Outsourcing services that could be done in-house.
There is always a need for highly skilled or capital-intensive services, such as legal and manufacturing, that should be outsourced. But I often see premiums being paid for social media monitoring, standard accounting, and facilities management. Outsourcing is often an expensive solution for poor planning.
10. Inadequate focus on hiring and people development.
Where hiring seems to always be associated with a crisis, I rarely see an adequate assessment of candidate skills, culture, and future potential.
This results in time and money lost due to high turnover, low productivity, and skill mismatches. Make employee management a proactive process.
In reality, there are an infinite number of ways to jeopardize the future of your business, but these are common ones I see that are often invisible to the business owner or founder. We all know that small businesses mush operate without a cushion, so unrecognized waste can easily lead to death.
In this age of new technology and new learning, you need to constantly be on the lookout for new tools and data to optimize your business. How much time have you spent recently working on the business, rather in it?
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