It’s often said, “Mistakes aren’t fatal but failure to mend those mistakes can be”. SMEs often find themselves trapped in a vicious circle of low entrepreneur skills, inefficient planning, low investment, lack of technical manpower, subdued revenues and slower growth. The reasons may be external or internal but the competence and stability of an organization are adjudged by its ability to turn the tides to its advantage. Business mistakes that SMEs make are inevitable but provide invaluable business lessons that can be leveraged over time. Here are five mistakes that SMEs make which erode their revenue base and eat into their profits.
Poor Business Planning
Lack of planning may result in shortage of necessary inputs, inadequate risk management and cash flow issues. Without planning, there is no mission statement for employees which may lead to low employee morale and retention rates. SMEs should, therefore, chart out comprehensive short-term and long-term plans to lay out a roadmap which reveals where they have been and where they want to be to create engagement, coordination and ownership within an organization.
Failure to Understand Market and Customers
Small businesses need to ensure that their product is commercially viable. It is imperative that they understand their competitive market space, buying habits of their customers and their propensity to spend in order to create and sustain demand for their products in the longer run.
Adequate finances are critical for smooth operations of a business enterprise. Insufficient finances and shortage of investment may act as an impediment in maintaining inventory stock, timely disbursement of salaries and in expansion and repair plans of an organization. It is important to realize that cash is the king and strong cash flows lends businesses both stability and credibility.
Resistance to Technology
SMEs still rely on manual workers for most of the business processes which result in inadvertent delays, low quality products and high costs. They are reluctant to adopt new technology and machines because of apprehensions about their cost and technical skills required to operate them. Adopting automation and artificial intelligence can revolutionalise the way in which businesses are conducted resulting in all-round efficiency, lower operational costs and higher profits.
Hiring Wrong People
Hiring an inefficient candidate drains time and energy and can cost an organization in multiple ways. There are productivity costs because of the time spent in training and retraining a wrong candidate and financial costs in terms of payment of salary to an unproductive employee, additional training and getting a replacement if that employee is fired. Businesses should, thus, put in place a mechanism to weed out unskilled candidates and for proper personality evaluation before recruitment.
Building a business, brick by brick, is a difficult task and business mistakes can only compound the process. But, it is important to perceive mistakes as an opportunity to learn and grow rather than as a sign of failure.