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Aug 19

Donna Probes: In business, its sink or soar

There are two pathways in the world of owning a business. One leads to successful growth and the other can lead to stagnation or decline.

In this column, we’ll look at four common mistakes that can contribute to sinking a business. Next month I’ll focus more on the optimistic side and examine the practices that help insure a higher level of success and prosperity.

Unless the odds are on your side through some stroke of miraculous luck, a good way to put your new business in jeopardy is through lack of advance research and planning. Tracking industry trends, calculating realistic cash flow projections and researching your competition all serve as very good indicators of how successful you will be in your business. Without a one, five and ten-year strategic plan, plus a well defined mission statement, you are more likely to fall victim to distraction, impulsive decision-making and lack of focus.

The next big mistake is not utilizing the marketing tools that have the greatest potential for reaching your customer. You must know where your customers gather their information when making their buying decisions. In today’s world it is most often the Internet. Therefore, every business owner must have a working knowledge of Internet based marketing, including websites, social media, search engine optimization, content marketing, blogs, geo targeting, cost per lead, and the many other web marketing concepts.

Another common mistake is lack of diversification. Unless you sell a product that enjoys endless demand and is proven to be recession proof, it is a good idea to create multiple income streams through a variety of product lines or services. A one-product business is always at risk for market saturation, new competitors and other threatening economic factors. So always look for ways to utilize your assets and equipment to produce new products and services. Stay current on trends and scout out entrepreneurial opportunities.

Mistake number four is overleveraging the business with too much debt. A good rule of thumb is a total debt to asset ratio of at least 1:1. In other words if you owe $50,000 in commercial loans, credit card debt, accounts payable and mortgages you should always have at least $50,000 of assets in the form of cash in the bank, liquid investments, and tangible property that can be sold instantly. Your accounts receivable is a “bird in the bush,” so the cautious business owner will not include this in the ratio.

The smart business owner will continually learn new skills and expand their knowledge. The next SCORE workshop will offer tips for taking your business to the next level. The September 17 event, held at the main Traverse Area District Library branch at 11:30 a.m. will start with a self-evaluation of your current sales process. It will include many helpful suggestions for increasing efficiency in order to beef up your bottom line. Time and people management will also be covered. This event is free of charge. To reserve your spot, visit www.traversecity.score.org.

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