Home > Career Development > Careers for women > The 7 Biggest Profit Draining Mistakes To Avoid As A Small Business Owner

The 7 Biggest Profit Draining Mistakes To Avoid As A Small Business Owner

Wow, 7,036 of you have read this.
business-women-discussing-workIf you’re a small business owner, you’ll know what it’s like. It takes all your energy to keep the business running. You’re constantly under pressure to keep things ticking over, keep your staff happy if you have them, and keep customers coming through the door.

You’ve got your eyes fixed on everyday operations, and that means you’re not always able to see the BIG PICTURE. Something’s holding your business back…

You find yourself admitting that:

  • You don’t have enough time
  • You can’t deal with all the issues
  • You often run out of steam by the end of the day

And the result of that is… you lose sight of one of the MOST IMPORTANT ASPECTS of your business – THE NUMBERS!

When deciding on pricing, many business owners make the mistake of only focusing on the gross profit margin and tend to forget about allocating something for their overheads or fixed costs.

The reality is that… over 80% of ALL businesses will ultimately FAIL, often leaving a trail of devastation in their wake for all involved. But many of these failures are completely avoidable. With some focused effort and determined attention on certain key number areas in your business, you can avoid this fate. Let’s face it – you can’t be good at everything, can you? There comes a time when you have to admit to yourself that you need help.

So let’s look at the seven biggest profit-draining mistakes that many businesses make when it comes to managing the financial side of their business, which in many cases may result in that business failing:

Common Mistake 1 – Failing to Factor in Fixed Costs When Pricing

When deciding on pricing, many business owners make the mistake of only focusing on the gross profit margin and tend to forget about allocating something for their overheads or fixed costs.

Common Mistake 2 – Thinking as Long as Money is Flowing into the Business Bank Account They Are Making Money

Just because money is flowing into the business bank account doesn’t necessarily mean that a profit is being made on it. Many businesses fail to look at all the factors when agreeing to do work at a given price level.

Common Mistake 3 – Thinking it is Job Done Once a Client Has Been Invoiced

It is not the end of the story when an invoice is sent to a client for payment. A business must ensure that the payment is collected in accordance with its payment terms.

Common Mistake 4 – Not Paying Close Enough Attention to Cash Flow

In business, cash is king! In some ways, managing cash flow is the most important aspect of running a business. If at any time a business fails to pay an obligation when it is due because of the lack of cash, the business is technically insolvent.

Efficient cash management means more than just preventing bankruptcy. It improves the profitability and reduces the risk to which the business is exposed.

Common Mistake 5 – Not Producing and Reviewing Financial Reports Regularly

Many business owners I talk to have an ostrich mentality when it comes to the numbers side of their business. They just hope that everything will be fine. I find these situations really alarming because apart from the legal obligations when it comes to record keeping, the business could be at serious risk because of this avoidance mentality.

Common Mistake 6 – Not Having a Budget

A budget is a comprehensive plan that estimates the likely expenditure and income for a business over a specific period, typically on twelve-month cycles.

To be successful, budgets should be SMART which means specific, measurable, achievable, realistic and timed.

Common Mistake 7 – Wasting Money Unnecessarily

I guarantee that almost every business is wasting money on something unnecessarily, whether it is through paying more than they should be, buying the wrong type of input or buying things that the business doesn’t actually need.

Producing regular financial statements and having a handle on the numbers is key to effective cost management.

Many business owners I talk to have an ostrich mentality when it comes to the numbers side of their business. They just hope that everything will be fine.

profitinfocusAuthor Bio

Kelly Clifford is the best- selling author of Profit Rocket” You are invited to join Kelly on a FREE 60 minute Profit Secrets Webinar where you’ll ‘Learn the 5 Keys For Making MORE Profit, FASTER and EASIER than ever before’ and much more! Click here to see more and reserve your FREE spot

You may also like
Reinvent yourself as a true professional
body language interview mistakes featured
Seven body language interview mistakes | Infographic
Networking - Twitter Chat
Mastering the Art of Networking
Olga photo featured
Getting ahead in a male dominated industry | Olga Podoinitsyna

Comment on this