Four mistakes every businesswoman needs to avoid to stay solvent
Want to avoid facing insolvency in your business? Here are four mistakes you need to avoid.
Insolvency is one of those terms that every entrepreneur knows, but hopes they never have to deal with. However, given that the odds are virtually always stacked against new and small businesses, avoiding insolvency is something that every business needs to keep an eye on. Fortunately, while insolvency is an unavoidable part of the business landscape, there are a number of steps that entrepreneurs can take in order to keep themselves from going insolvent.
All entrepreneurs face the same market forces that often conspire to derail the prospects of fledgling startups. However, there is good news for women. As reported by Company Rescue, a recent study by KSA Group Limited, one of the UK’s largest insolvency practitioners, small and medium-sized enterprises with a woman at the helm are statistically less likely to face insolvency than firms led by men.
When entrepreneurs do find their business struggling, there is often at least one of the following four mistakes at the heart of the issue. Avoid these and you stand a good chance of avoiding insolvency, even if things do get tough.
1) Lacking a business plan
A business plan is an essential document for any business, but too many businesses view the primary purpose of their business plan as being to secure investments. Certainly, you will need a strong and detailed business plan to convince other people to put their money into your business. However, your business plan should also serve as a guide for the growth and development of your business.
It can be tempting to deviate from your business plan in response to both positive and negative circumstances. For example, if your business is making much more money than you were projecting, you may want to revise your plan and try and make even more money.
However, allowing that money to build up as a reserve, while you continue to fund and finance your business as you planned for a couple of years can be hugely beneficial in the long run.
On the other hand, when things are much slower than you were expecting, it is sometimes necessary to evaluateyour objectives and operations in order to stay afloat. Obviously, you shouldn’t follow your business plan straight off the edge of a cliff, or into the side of a mountain, or into any other metaphor, but you should be wary of deviating too far from your plan because you are chasing bigger profits.
2) Lacking a roadmap for the future
Your business plan should include a roadmap: a set of key milestones in the evolution of your business and details of when you are expecting to achieve them. You shouldn’t view the milestones on your roadmap as being deadlines as such, as there is no sense in scrambling to meet an aspirational deadline. You might even need to adjust your roadmap as you go. The further away from the present a prediction is, the less likely it is to be accurate.
Your roadmap is important in informing your decisions about how to best take your business forward. The best entrepreneurs are those that are the most aware of the state of their businesses at any given time. By remaining aware of, and alert to, any challenges that might arise, you will be able to react promptly and effectively to any financial problems before they threaten your business’ survival.
3) Inadequate market research
In order to market your business efficiently, you need to understand who you are marketing to. It is hard to overstate the value of market research. Identifying the demographics who frequent your business the most will enable you to more precisely target your marketing efforts for maximum effect. The more granular your information about your audience, the sharper the precision with which you can craft your marketing campaigns.
More efficient marketing means more sales and greater profits. An investment in market research can pay for itself much quicker than many entrepreneurs assume. It is also a valuable tool for avoiding insolvency.
4) Not diversifying
Failure to diversify your business, or putting all your eggs in one basket, leaves you much more vulnerable and exposed to unpredictable market forces, and could even sink your business if you’re not careful.
Choosing to provide products or services to just one client may seem like a good idea at the time. However, if you become reliant on one client for your income, you will also be reliant on them paying you on time and requiring a regular workload.
You also won’t be able to refuse if they ask for discounts or extra services included in the price. Instead, try and work for a number of smaller clients if you can. This is almost always a better idea, and a more profitable one too. Plus, if one small client stops requiring your services, it won’t sink your business in the same way a large client leaving would.
Thekey to survival in business is the ability to keep a cool head. As long as you carefully plan your actions and resist the urge to make risky, impulsive decisions for short-term gains, staying clear of insolvency shouldn’t be too difficult for a determined businesswoman.
Photo by Daniel Apodaca