6 Big Budgeting Mistakes Companies Make With Their Marketing Strategy
With the amount of perseverance and time invested into a business by a young entrepreneur or even a moderately sized company that’s been around for one or two years, it’s often hard to re-evaluate one’s budget and admit that there are glaring financial mistakes that have been made.
After all, the decision to hire an accountant or marketer passes through the judgment of a CEO, so uncovering a significant budgeting error calls the abilities of some employees into question along with the financial integrity of the company. It’s not a happy situation by any measure.
But such a situation and the size of such financial mistakes are bigger and occur much more frequently than you would believe.
For instance, did you know that some of the most common reasons for small business failure are things like choosing an unprofitable business, inadequate cash reserves, failure to observe and define the buying habits of customers and the market in general, and failure to price a product or service correctly?
Let’s examine some of these frequent budgeting mistakes in depth and some possible fixes so that you’ll be able to better assess the set of financial risks which exist for your business.
Choosing a Business With No Market Demand
One of the worst things that you can do to yourself as a newer or smaller business owner is to trick yourself into thinking that your business occupies a specific niche of some sort and can capitalize on that market as a result.
This is a mistake in the cases where either:
(1) your business doesn’t actually serve a niche, or
(2) your business serves a niche but the exclusivity of the niche does not hit a price point where the sale of an exorbitantly priced product cannot justify the diminutive size of the total client pool.
There are plenty of products by small and big companies alike attempting to appeal to niches only to discover there was never a niche market in the first place. Don’t send your own finances to the same graveyard.
Not Having Enough Cash Reserves
This signifies one of the classic budgeting mistakes for anyone — whether it is a business or an individual.
You know you’ve definitively and positively messed up with budgeting when you simply just don’t have enough money to go forward.
Not accounting for personal and business expenses combined during the first six months of your startup or simply allowing for the mismanagement of money in the case of a larger company’s administrative and executive costs constitutes a set of both common and fatal business mishaps.
Mispricing Your Product or Service
Determining the price of your product or service shouldn’t be like an episode of The Price is Right for your business, if that wasn’t clear already. The price of a product or service should be carefully evaluated in accordance with surveys sent to consumers about how much they would pay for your product and what prices they would think are reasonable. You need data and concrete evidence behind a price in order for it to function properly and allow your company to profit. You’ll want to familiarize yourself with the different types of pricing strategies as well to solidify your insight.
Not Understanding A Market or Consumer Behavior
If you’re going to go exploring in a dark cave, the set of things that you’ll want to bring along with you should consist of things that ensure your safety: the right gear, appropriate food and drink, clothes, a flashlight, compass, and so forth. In business, the dark cave is the “market and consumer behavior” and your safety equipment is the preparation you do to serve that market and understand your consumers. One example of a company that does their due diligence on this issue is Adventure Bucket List through their research on how the tourism industry intersects with their own corporate booking and touring services.
Failing to Leverage Social Media
Most businesses don’t exist in a local vacuum anymore because of the nature and widespread reach possessed by the Internet.
In a market, businesses are in constant competition with each other, so the ones that leverage social media properly will find themselves at a great advantage to those that refuse to acknowledge its influence. There aren’t many companies remaining that are complete luddites and are still massively successful.
Insufficient Cash Flow
This sounds like the previous point about cash reserves, but it’s actually distinct. Cash flow is like the oxygen that’s breathed into the figurative lungs of a business that allows it to survive.
Without an adequate cash flow, your business will have difficulty responding to demand, paying off operating costs and other expenditures, and with steady growth in general.
This principle is especially true for businesses which are marketplaces that depend on the enthusiasm and willingness of their clients to make deals in order to thrive.
Estimating a lower and upper bound for the expected monthly cash flow for your business will be incredibly worthwhile in helping you determine your business’ financial health.