Things that kill business growth?
Well, businesses die very strange deaths, the heart attack style!
Things will be looking up one day and then before you know it, the business is on its knees- collapsing. You are left with debts to pay, you render your employees jobless, and if you are very unlucky, endless lawsuits and multiple fires follow you for years afterward. This is simply because when you commit to your business you go into it with enthusiasm and the unwavering ambition to make it grow no matter the challenges along the way!
If this is your mindset at the beginning of your business’s establishment, you are an entrepreneur.
However, what many entrepreneurs don’t know is that a series of mistakes and bad decisions happen right before a business collapses.
These mistakes drag down the value of a company gradually, behind the scenes, until the business falls into a ditch. And because these mistakes are compromising your company from within, fixing them is almost impossible unless you as an entrepreneur halt your business’s operations and deliberately “screen” the company to identify and adequately address possible factors that are inhibiting business growth for your enterprise.
Whatever the building stages of your business are, you have to be wary of these factors that could be internally jeopardizing your enterprise, even at its startup stages. This is essential when you want to grow and expand.
Once these hidden inhibitors are identified, finding cost and time effective solutions is relatively easy and practical. However, this stands under the assumption that you are willing to prioritize switching your priorities into addressing these factors that are legitimately killing your business growth. A true entrepreneur has the backbone to take this leap of faith, acknowledge the risks, and do what’s essential to avoid bankruptcy and ensure the continuity of business growth. To help you navigate through these inhibitors early enough, we have listed six things that can easily kill business growth at its startup stages, and even at its sophisticated building stages:
6 Things That Can Kill Business Growth
Partnering with the wrong people
Not all investors mean for a business to grow and expand. If you want to keep your enterprise prospective and ensure business growth, you have to be careful who you trust. Some will come in to take advantage of the owner’s naivety, especially for new entrepreneurs at their business’s startup stages willing to take any financial support they can get. As a new entrant going through the various building stages of a business, make sure to go into it with great confidence, and don’t easily welcome anyone offering you help. If you do, the biggest problem here is that you can never realize the mistake you made partnering with investors who are not trustworthy until it is too late. The wrong people either milk a business dry or kick the original owner out after claiming the majority of the shares. Some will force you to spend the company profits in a way that doesn’t foster growth, ultimately compromising your ambitions to grow and expand.
How can you tell if your partners will jeopardize your business growth? The obvious giveaway is ideological and ethical differences. Only accept investors who are willing to take the back seat and let you take control of the wheel from the startup stages to the advanced building stages your company is experiencing unfathomable business growth. Ask them tough questions before committing to partner with them. Make sure you understand their role in the company, their work ethics, and what their expectations are. Get them to commit to your business idea on paper before you sign anything away. You have to make sure they want to grow and expand just as much as you do!
Limiting your talent pool to the local labor market
Unemployment rates are low in most developed countries, which leaves scarce worthy talents in such labor markets. Leveraging the most talented pool of workers within the labor force is essential to keep your business growth skyrocketing. Top college students even get jobs before they sit their final paper. If you insist on strictly hiring Americans for your American startup, for example, your chances of building your dream team will be very low. Insufficient talent lowers your competitiveness and can be the genesis of your company’s eventual death. That is why you should consider international hires, especially from underdeveloped and developing economies in Asia, Africa, and Latin America. These hires can even help your business expand to new markets and gain global competitiveness, especially if you’re at an advanced point when it comes to your business’s building stages. And in case you are unsure of your abilities to hire and manage international employees, don’t worry because you can always outsource HR services to qualified global PEO enterprises such as New Horizons Global Partners. If you’re still at your startup stages then you should leverage your local labor market as you still have to cut down on expenses whenever you can.
Cutting core expenses to fix profitability
A time comes in the life of a business when the profits dwindle, forcing managers and owners to re-strategize. One way business owners boost profits, and consequently, business growth is by cutting some of the non-basic expenses. That is a standard business practice if you’re trying to grow and expand, but it can be extremely risky if you don’t understand where your business stands in the expenses-revenue equation. Before making expense cuts, first, review your revenue to see if the problem is actually on the expenses side. Could be your company isn’t making enough money, to begin with, so what you really need to fix is your revenue generation problem- not an expenditure problem. Use revenue performance assessment tools to review and fix your revenue regeneration problem because cutting expenses isn’t always the solution. It can only exacerbate the fall of your business growth if you end up cutting the wrong expenses.
Not understanding your customer
Poor customer insight before you start your business, and at your startup stages, can be the reason your business growth ultimately lives to not see another day in the long run. You need to know who your customer is from the beginning and in case their preferences and social status evolve, you must be ready to evolve with them in order to grow and expand. That is why you must invest in thorough market research before you open shop and continue investing in regular market studies even after your business is up and running.
Also note that your business growth should be navigated by market demand and needs, not the amount of capital you can afford to pump into it. It’s not really feasible to invest too much in production just because you have the money, only to be left with empty accounts, cluttered warehouses, and poor ROI. Whatever the building stages of your business might be, you always have to be purposeful with your capital.
Lack of a pricing strategy
How do you price your products? Most business people make the mistake of wanting to have it all, to have the entire market for themselves, so they sacrifice pricing and, by extension, profitability in the process. What your business needs are customers who understand the worth of the services and/or products you offer; people who are willing to pay the right price for the right product. You cannot make losses by producing low quantities and selling everything at a profitable price, but you can make huge losses by dominating a market but for the wrong prices. To ensure business growth in the long run, you need a pricing strategy. Here are 2 pricing strategies that you can try:
Cost + Pricing model:
In this model, you add up the cost of raw materials, production costs, time costs, labor costs, distribution costs, and any other incurred expenses, and then add a percentage profit margin. If a product costs you $100 to produce and distribute, you can set the price at $120 in order to make the 20% profit.
In this case, you calculate pricing based on how valuable your product is in the lives of the target customer. Customers will pay anything they can afford for as long as they reap the added benefits of consuming your products. They can pay $200 or more for a product you produced and distributed for $100 for as long as they understand the value they are getting.
Some entrepreneurs, even in their startup stages, feel like they need big, fancy offices with expensive furniture and office gadgets to prove to the world that they are in business. Some waste money on unwarranted, unnecessary employee remunerations. Others spend big on social media and online marketing without measuring how effective those marketing strategies are. Only spend on what is absolutely necessary. If you can operate online without a physical office, stop wasting money on rent! Eliminating unnecessary costs is fundamental to business growth! To grow and expand is not overestimating what you actually need!
There you have it!
If you constantly assess your assets and resources vis-à-vis the overhead costs and make the right pricing and partnership decisions, your chances of going under are greatly minimized. Most importantly, don’t lose sight of the customer and the target market no matter what. There is no business without revenue and there is no revenue without customers. If you swear by these steps, there’s nothing stopping your business growth! If you want to grow and expand, you have to keep track of all of the aforementioned factors throughout the entire journey of your business, starting from the startup stages to the sophisticated building stages.