Business Adviser Magazine September 2013 | Page 16

5. lack of capital
Check your business assumptions. The norm is optimistic sales projections, too-short product development timeframes, and unrealistically low expense forecasts. And don’t forget weak competitors. Regardless of the cause, many businesses are simply undercapitalized. Even mature companies often do not have the cash reserves to weather a downturn. Be conservative in all your projections. Make sure you have at least as much capital as you need to make it through the sales cycle, or until the next planned round of funding. Or lower your burn rate so that you do.

1. Big client syndrome.
If more than 50 percent of your revenues come from any one customer you may be headed for a meltdown. While it’s both easier and more profitable to deal with a small number of big customers, you become quite vulnerable when one of them contributes the lion’s share of your cash flow.

2. Creating in a vacuum

top 10
business mistakes
4. low prices
Some entrepreneurs think they can be the low price player in their market and make huge profits on the volume. Would you work for low wages? Why do you want to sell at low prices? Remember, gross margins pay for things like marketing and product development (and great vacation trips.) Remember, low margins = no profits = no future. So the grosser the better.

You and your team have a great idea. A brilliant idea. You spend months, even years, implementing that idea. When you finally bring it to market, no one is interested. Unfortunately, you were so in love with your idea that you never took the time to find out if anyone else cared enough to pay money for it. You have built the classic better mousetrap.

3. Equal partnerships
Suppose you are the world’s greatest salesman, but you need an operations guy to run things back at the office. You split the company 50/50. That seems fine and fair right now, but as your personal and professional interests diverge, it is a sure recipe for disaster. Either party’s veto power can stall the growth of your company, and neither holds enough votes to change the situation.

6. out of focus
If yours is like most companies, you have neither the time nor the people to pursue every interesting opportunity. But many entrepreneurs - hungry for cash and thinking more is always better - feel the need to seize every piece of business dangled in front of them, instead of focusing on their core product, service, market, and distribution channel. Spreading yourself too thin results in sub-par performance.

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BUSINESS ADVISER