You have to know them as I know them (after I have failed in several) because if you do not do something to avoid them you will see how your business is decomposing until there is a time when it will disintegrate.
Yes. It is crude, but it is reality.
Let’s go there, these are The 7 mistakes that will make your business fail :
1.- Failure to carry out adequate budgetary and management planning and control.
Every day more, and especially in these days more and more turbulent and with more uncertainty, you need to constantly monitor the performance of your business through effective management control. This involves several steps:
- planning and realization of budgets that allows you to anticipate the future .
- monitoring and monitoring of the most important variables of your business to ensure that what you said you were going to do is what you are doing .
- implementation of corrective measures that allow you to return to your path if you have abandoned it.
2.- Use the money from your business for your personal use
Taking money out of your business box to spend is one of the biggest mistakes you can make.
Your business is your business.
And you are you.
You must have a current account for your business and a different one for you . In the account of your business you must have collected the income and expenses of your business. Only from your business. And you can manage transferences from your business to your personal account for certain issues but never for current payments.
Separating your accounts is essential.
3.- Do not control your waste.
Your processes and activities can not use more resources than strictly necessary . You incur in waste when you produce too much, you have a bigger inventory than you need, you spend too much on transporting your products, you have too many quality problems that make you have to repeat the process or the service.
Even talking about services, when you spend too much time in a certain service.
And beware of this: poor management of time, of your time, is vital to ensure that you are not wasting the greatest asset you have in your business. Your.
4.- Invest too much in Assets.
An asset, well, in short, is a good that you need to be able to produce your products or services. If you invest in having the latest technological innovation just by having it, you are wasting resources , because you are reducing your liquidity and your ability to deal with other needs only on a whim.
And here is your head the most important thing.
Do not fool yourself.
You do not need the latest iphone model, no matter how much you want it.
5.- Not knowing your equilibrium point.
Break even is that sales volume that allows you to start earning money . If you have very low margins or very high fixed costs, you have to sell a lot of volume to reach the stalemate and start earning money from here.
You have to know this stalemate , because if you are in a business where it is difficult for you to reach that volume of sales, it is very likely that you will usually generate losses instead of profits.
6.- Manage your funds badly.
We are going to separate two concepts here:
- own funds (the euros that you put into your business)
- third-party funds (the euros you borrow for your business)
The question is simple: if what you pay for the funds is more than what you get for them: BAD BUSINESS.
If we talk about other people’s funds, what you pay is the interest rate that the bank applies to you. And what you earn, the profitability you get with those funds.
If we talk about own funds, what you pay is the opportunity cost (that is, what you could earn if you used that money for something else, for example to invest in buying shares of Banco Santander) and what you earn the profitability of your business .
Remember, because it is very important: what you pay can not be more than what you earn.
Simple but effective .
7 .- Manage your level of indebtedness and liquidity badly.
If you ask for short-term money to pay for long-term things (that is, if you ask for a line of credit to pay for an investment, for example), or to buy stocks, it is very likely that your business will end in ruin.
And I’m telling you really. By experience.
It is very important that you take into account your real sales capacity, without triumphalism and that you use the current income to pay current expenses . Just as you should not make large investments borrowing but using your resources .
What your business generates year after year: reinvesting your profits in your business.
Life is cycles and business too. It is very likely that you spend seasons of skinny cows, for which you need to manage an emergency fund that allows you to overcome these periods. That is why it is so important to have your level of debt controlled, because the bank will always ask you to pay.
I’m going to tell you a secret: In the finished product market, something very similar to what happens in the stock market usually happens: the smartest ones, who see the recession’s arrival in time or fall in demand, sell their stock as soon as possible. and cancel their debts with those sales . And the laggards are left with their stock and their debts.
They eat the brown go.
Be careful, okay?