People
People are the backbone of your company, and you cannot grow without them. From technical expertise to customer service to mentoring, having the right people in the right roles is crucial for success. However, business owners often struggle with high employee overhead, especially in low-margin industries. It’s advisable to structure compensation based on performance.
Product/Service
Consumers drive demand, so continually assess whether your industry is thriving or declining. The most successful businesses solve problems and meet needs. If your product is not in demand, revenues and profits will decrease. Reflect on your business’s purpose and direction, identify where demand lies, and create products or services that meet that demand.
Process
A lack of processes and documentation can lead to waste, inefficiency, and lost productivity, ultimately decreasing profits. Well-defined processes are essential for scaling your business and adding value, as they can become valuable intellectual property that gives you a competitive edge.
Proprietary
Many business owners lose money, go bankrupt, or fail because they don’t protect their intellectual property (IP). Failing to federally trademark your company name, slogans, and logos can result in costly legal battles. Intellectual property includes copyrights, patents, reputation (goodwill), databases, proprietary processes, and more.
Patrons
Customer concentration is a major cause of business failure. Typically, 80% of your revenue comes from 20% of your clients. If a few clients make up most of your revenue and you lose them, your business is at risk. Diversify your client base and keep existing clients happy, as it is more costly to acquire new clients than to retain current ones. Engage your social media following by adding them to your database to increase your business value.
Profits
Understand your financials and monitor your KPIs (Key Performance Indicators) daily. Implement checks and balances to protect against embezzlement, which happens frequently due to lack of oversight. Maintain a savings account for emergencies to sustain your business during tough times, such as during the Coronavirus pandemic. Many businesses fail because they lack the reserves to operate for an extended period.
Location
If your business is concentrated in one area and a disaster strikes, you could lose profits and face the risk of going out of business. Diversify your client base and locations so your business can operate anywhere. Consider licensing your products or services to other businesses in different locations for royalties or profit-sharing. These licenses become part of your intellectual property.
Manufacturing
If your business relies on manufacturing in a single country and a catastrophe occurs, you could face significant losses or go out of business. It’s wise to have backup manufacturing plants that can start production if needed.
Technology/Cyber Security
Inefficient technology can lead to lost productivity and profits. A cyberattack can cause a company to lose everything and possibly face lawsuits from clients. Invest in cybersecurity and ensure compliance with best practices to protect your business.
Legal Protection
Lawsuits are common and can be costly, regardless of their merit. Protect your business with appropriate insurance, including E&O, liability, workers’ compensation, malpractice, disability, life, and business interruption insurance. Business interruption insurance can cover expenses if a disaster disrupts your operations.
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