Smpl’s Andreas Melvær is an experienced SME entrepreneur. He wants to help you avoid the mistakes that rob SMEs of their success.
Your company is growing! Amazing news. I’m so happy for you.
There’s no feeling quite like seeing all the blood, sweat and tears paying off. (I’ve been there with my own company and helped lots of other companies do the same.)
But the job is never really done. So, to help you stay on that upward trajectory, here are some of the most common mistakes I’ve seen growing small- and medium-sized business owners make.
Mistake 1: not hiring the right people
When you say ‘hire the right people’ everyone immediately thinks of the right skillset.
Of course, you need the right skills, but how often do you consider a recruit’s fit with your company’s values and its culture? How often do these elements appear on your job descriptions? And how often do you ask about them in interviews?
People’s skills and experience often speak for themselves, particularly in our world of data, metrics, and KPIs.
But how they got there is a different matter. That’s what will help decide whether you’re going to love or loathe working with them.
So, spend more time asking ‘how?’ when you are interviewing people and less on ‘what?’
I am not saying you should hire people who are just like you or – even worse – people that always agree with you. What I am saying is hire people who have the right skills and who share your vision and your company’s values.
Mistake 2: Expanding too fast
It’s great to be popular! When you are, it’s tempting to take on more clients, sell into new markets, and get more staff on board ASAP.
But before you do, ask: ‘do I have the cashflow and resources in place to support these ambitions?’ If you don’t it’s going to get tricky, fast.
When it comes to expanding, I’ve got one word for you: ‘planning’.
The best way to manage growth is to know where you’re going and how that journey will play out in terms of structure, processes, and people.
Having the right tools in place to manage your time effectively – whether that’s digital calendars, post-it notes, or anything in between – will also be crucial in doing this.
Mistake 3: Poor cash flow management
Poor cash flow is the thing most likely to kill any growing SME.
When sales are increasing, it can feel like you’re swimming in money. But the reality is that running an SME is almost always a bit of a tightrope. It can just take one large payment being delayed (or cancelled) to throw everything up in the air.
To help ensure you stay out of trouble, I’d advise a few basic things:
- Keep track of all incoming and outgoing funds (including those for payroll) so that you know exactly what cash your business has at any given time
- Have an action plan ready if things don’t add up as planned (e.g. where you could cut costs, or where you could get a loan)
- Beware of working with suppliers who offer discounts in return for paying in advance. The discount would have to really make sense financially before I committed to anything like that
Mistake 4: Not having a marketing strategy.
Marketing might be daunting but it basically comes down to knowing four things:
- What you’re trying to achieve with any marketing activity (i.e. your specific, measurable goals)
- Who your target audience(s) is/are
- What they need
- Where they are / how you’re going to reach them
Marketing means making sure that you understand your customer’s needs and problems, not just their desires or wants.
One way of making sure you’re ticking the right boxes is to work your way through the ‘The 5 P’s of Marketing’, also known as the marketing mix. These are variables that you can control to satisfy customers in your target market, add value to their business, and help differentiate yourself from competitors.
These Ps are:
- Product: this covers the features, advantages, and benefits or using your product (or service), covering functionality, appearance, warranty, quality, packaging, and so on
- Price: the price tag you’ve attached, any discounts, payment terms, credit terms, price matching, etc.
- Promotion: how you make yourself better known to customers; these activities are often split into paid (e.g. adverts or sponsorship), earned (e.g. public relations activities) and owned, (where you use your own content and channels to reach customers). FYI: make sure you calculate the cost of acquiring a customer using each method as best you can, to see if it’s worth it
- Place: this is where your product/service is seen, made, sold, or distributed/bought, so think distribution channels, logistics, location, service levels, etc.
- People: the way your staff, sales, and customer services colleagues behave, look, and interact with customers can make a huge difference
There are plenty of free resources available online that can help with creating a marketing strategy. A particularly good place to look is HubSpot.
Mistake 5: Misreading the market
Markets move fast and you’ve got to watch them like a hawk.
There will always be someone in the wings and working on something cheaper or better than your offering.
Customers’ wants and needs are ever-changing change, driven by any number of developments, whether they be social, political, technological, legal, or whatever else.
You need to monitor the market, the needs of your customers, and what your competitors are doing… then keep improving.
Doing so will help you:
- gain a better understanding of what your customers want and how they behave
- understand their preferences better than competitors who don’t read the market as well as you do
- adapt as necessary and stay ahead of the game
I recommend keeping an eye on the media (both industry websites and the wider news environment), attending conferences, and listening to all your different stakeholders – in particular, your customers.
Mistake 6: Not managing your sales pipeline
You’ve got to keep a list of potential customers that you’ve identified as being good fits for your product or service.
Maintaining that pipeline – and the different levels of interest each prospect within it has shown – is a critical part of your sales process.
It can be difficult to constantly identify new opportunities and keep them flowing through your pipeline.
Here’s how to make sure things don’t get clogged up:
- Identify companies that have expressed interest in what you offer (by signing up for your newsletter or downloading an e-book, for example) and reach out regularly so you stay top-of-mind
- Set aside time every week to reach out to prospects
- Make sure all employees know who should be contacting whom at identified target companies before reaching out themselves (you don’t want multiple people annoying your contacts)
Mistake 7: Not focusing on repeat business
One of the biggest mistakes that SMEs make is not targeting existing customers.
It’s a lot easier to sell to an existing customer than it is to find a new one.
If you do your job right and provide excellent customer service there’s no reason your current customers won’t want to continue buying from you.
In an ideal world, you’d automate this process by creating products and services that automatically earn you Monthly Recurring Revenue (MRR) or Annual Revenue (AR). Software companies are excellent at this, which is why they command such big valuations so quickly.