Oct 29, 2022

11 Common Mistakes in Business

These are 11 Common business Mistakes made by people. What mistakes lead to business failure? Here is a list of common mistakes in business to avoid with examples. Why do entrepreneurs fail and how can they know what corporate mistakes people make? 

1. Over trading and over leveraging: 

Success creates confidence, and confidence makes us feel that I am right, and I will be right in the future too. When there are good days, many businesses forget to create good reserves for rainy days. In fact, they go for expansion without projecting a feasible cash flow. They borrow and borrow again to move further. Interest is a 24x7 charge. What is an ideal mix of capital and borrowed funds is a very important question and each entity has to decide it individually, depending upon their circumstances.

2. Underestimating and forecasting of the Risk: 

When things are normal, everyone is generally in a relaxed mood and is resistant to any change. Like any other process, risk also evolves in new ways and poses challenges with changing times.

3. No preparation for timely replacement: 

Over a long time, every business builds assets, and these assets need proper replacement. Here, assets mean not only physical assets but key people in a team, vendors, buyers, or advisors too. With changing times, businesses have to plan in advance for many such replacements. For example, if a CEO is replaced all of a sudden, it costs too much directly or indirectly. 

4. Ignoring structural changes: 

Change is a universal and ever-going fact. Sometimes the entire equation of business gets changed. It may be due to technology, likes and dislikes of people, changes in usage, entry of new players, change in taxation, etc. When such changes knock on the door, one has to be vigilant and plan an immediate future course of action. A common example is the retail industry, where many small players could not implement digital transformation, and eventually they lost their share of business to the organized players. 

5. Depending on a single product, vendor, or buyer: 

This blunder is very common in small and medium enterprises. These entities are predominantly dependent on one or very few suppliers or buyers. This situation is very risky and sometimes even for the very existence of the business itself. 

6. Less adoption of the latest technology and updates: 

Technology is an enabler of great scale in all businesses nowadays. If any business ignores technology, it can’t scale or even survive sometimes. A proactive approach to the adoption of the latest technology should be the habit of any business. 

7. Ignoring pillars of the business: 

Every business and business house has some pillars to succeed. There are very few people in the core team who shoulder responsibility, and they are always available for the growth of the organization. These people are very valuable assets, and they should not be ignored. Ignoring such people is a blunder, and mostly it happens at the time of succession or when key management changes. 

8. Not investing adequately in human resources: 

After all, all the work of any business is handled by human beings. If adequate investment in developing good human resources is not planned, it will cost a very high amount in the future. Retaining good people and making them responsible and skilled through training is a great asset. I would specifically mention here that if a top management states that it has no time, then it is probably not lacking time, but it is lacking delegation or good human resource planning.

9. Not re-evaluating the norms and processes: 

This is a very common blunder. Many businesses are run with norms that are either inadequate or lack clarity. This blunder becomes very serious when there are no review procedures at regular intervals. 

10. Not using data for decision making: 

In this digital era, we can still notice some businesses do not use data properly and rationally. With increasing data availability, any business can’t afford not to use this in decision making. Data is base and can change future, if collected systematically and used properly. 

11. Not believing in "giving or sharing": 

Stakeholders are very important; these can be shareholders, workers, staff members, creditors, government, advisors, bankers or any other agencies in a business. Management with a great vision always believe in giving all stakeholders their due shares in due time and not keep them at toe. This makes them an ideal candidate for successful businessmen. There are businessmen who earn well, but there are business leaders and icons who earn, distribute, and enjoy a reputation too.

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