Running a business is never easy. As a matter of fact, it can be quite challenging at times. We regularly meet business owners that have placed crucial tasks on the back burner and dedicate all their time and their energy in the daily functions of their business. Although day-to-day business operations are critical to the organisation’s success, it is paramount to also take care of some key-areas to ensure the smooth running of the business in the long run. Here are 5 of the most common mistakes owners made repeatedly, which, in most cases, lead to failure.
1) Lack of Financial and Business Planning
To know whether you have reached your targets or not, a business plan is more than just a necessity. It allows you to have a deeper understanding of your services and/or products in relation to your target market. What you need is a good business plan that will guide you through marketing- and finance-related matters, as well as investments and HR.
Begin with a SWOT Analysis that should help you identify and evaluate both the strengths and weaknesses involved in a business venture or project, and the threats and opportunities that come along with it. In addition, a risk management model can be particularly helpful and will allow you to evaluate risk and realise whether your business plan’s base expectations are on the right track and are on achievable or not.
2 ) Duplication Errors
It is only human to make manual errors. However, when running a business, especially a growing one, these mistakes can be very expensive. With today’s complex regulation and economic instability, you need a robust system to help you eliminate or at least minimise the issues that emerge from using complex accounting and traditional accounting methods. Therefore, a scalable and quite simplistic accounts management system will give you a good chance for organic growth.
3) Not Getting Professional Advice
Engagement with an accountant throughout the year allows you to access strategic planning and business advice to become more profitable. A knowledgeable accountant that provides more than one service can also help you with growth forecasts, sales, succession planning, tax planning and cash flow management.
4) Not Planning for Tax
If you find you are procrastinating on paperwork or not keeping proper records and leaving everything to the last minute, won’t keep your accounts up-to-date. This means that you will have absolutely no idea how your business is performing, and it is highly unlikely you will be able to identify trends in your income-expenditure relation or sales over the course of the year. It is best to understand if you have been under-investing in some areas and overpaying or overspending in others well before tax deadlines, or get your accountant to analyze this for you well in advance.
5) Not Understanding your Break-Even Point, Ratios, & KPI’s
The break-even point is THE most important number in every business. It is the number that tells you where your expenses meet your revenues (or the point where your gains equal your losses). Many business owners confuse the break-even point with the Gross Profit Margin and Net Profit Margin. However, these two are different things. Knowing your products’ (or services) profit margin and your overall gross profit margin will allow you to identify high-margin (hence profit making) and low margin items, and products, services, or activates that come with a profit.
For further information on how on profit margins, contact Paul Redmond on 053 9170507 or email paul@rda.ie