It makes you wonder – what does that one business do to succeed, that the other two do not? Perhaps it is not what that one company does, but rather what it doesn’t do. The difference may lie in avoiding the common missteps that can often result in overextending your business and your resources.
Five Common Ways Businesses Become Overextended
#1 – Trying to Grow Too Fast
Entrepreneurs start their own businesses because they have faith in their abilities and their products, and they believe they can succeed. But sometimes, overeager entrepreneurs try to grow their businesses a little too fast. Don’t overextend your business by accelerating growth haphazardly.
Whether trying to be the first to market with a new product, or trying to prove to their investors that their investment was worth it, business owners often take on more overhead than they can afford, while losing sight of the short-term goals that will gradually grow their business at a more reliable pace. If you need to hire some new team members, consider hiring remotely. You can then use online whiteboards to connect everyone together.
#2 – Overspending
It can take a while before a new startup starts turning a profit. To help the company weather through its growing pains financially, entrepreneurs will often turn to investors, business loans, or some other line of business credit. Ensuring you have access to these credit lines is important. Monitoring your and establishing your company’s D&B D-U-N-S® is a great way to make sure that you have access to capital when you need it.
Unfortunately, first-time business owners commonly miscalculate the time span between starting a business and generating a profit. Before they know it, they have spent all of their startup capital, and the business has yet to become profitable. Carrying enough cash in reserves will help to see you through the lean times, while keeping you prepared for those times when life throws you an unexpected (and costly) crisis.
#3 – Taking on Too Much Debt
As is often the case with businesses that overextend themselves by overspending, they will sometimes resort to taking on additional debt in order to keep their doors open a little while longer. Smart business owners know their borrowing limits, and companies like Workday Australia offer easy to use financial applications.
#4 – A Poorly Prepared Business Plan
When a business plan is well-researched and well-prepared, it helps a business owner to stay on track. Business plans are meant to forcing a business owner to consider his or her company’s future financial needs, its marketing strategy, its management strategy, its competition, and other important factors – at all times. When the business has a poorly prepared business plan, it is all too easy for the business and its financial resources to become overextended, because there is no “guiding light” to follow.
#5 – Ineffective Marketing Strategy
Advertising is expensive, but it can cost your company a whole lot more if you market it ineffectively. When you do not know who your target audience is, the resulting marketing and advertising efforts will usually attract few customers, rendering your business’s marketing budget ineffective and overextended. Take the time to profile your ideal customer, so you can develop a marketing strategy that will bring in the type of customer your company needs in order to grow.