Top 10 Mistakes New Business Owners Make
This list of common small business mistakes ranges from things as simple as not doing things you’re not good at to not mistreating suppliers and not letting customers mistreat YOU.
Here are the top 10 mistakes new business owners make.
Don’t do things you’re not good at.
You know your business, but you’re not an expert at everything. So, stop doing things that you don’t do very well and instead focus just on the things that you do best. Doing things you don’t do well is one of the most common small business mistakes because it’s so easy to try to do everything yourself. But really, it’s beneficial to hire experts to help you. This can mean hiring someone to do your payroll, file your taxes, send out emails, fix your trucks, key in orders, or arrange for travel. If you’re doing stuff like this, you’re probably wasting your time. Yes, there’s a cost to hire someone. But it costs you more in time and lost opportunities to do everything yourself.
Don’t blame others.
That’s your name on your tax return, your name on the articles of incorporation, and your name on the front door. It’s your business. You get all the riches and glory. But you also get all the headaches. That’s because every problem—every issue, every challenge, every mistake, everything that goes wrong—is ultimately your fault. You hired the people. You bought the tools. You sold to the customers. You chose the priorities. This is your show and if anything happens, it’s your responsibility. This is just one of the common small business mistakes entrepreneurs can easily make early on.
Don’t ignore the math.
So, you’re selling something for $125, so what’s your margin? How many of these things do you have to sell in a month to break even? How often does your inventory turn? What happens to your debt maintenance if interest rates go up a point? What would be the impact of a 5% rise in your supplier’s costs? What percentage of your sales is overhead? What percentage of your labor represents health and retirement benefits? These are the things that the most successful business owners know off the top of their heads. They’re boring, mathematical, numerical facts that drive the success (or failure) of every business and not knowing your profit margin is one of the top 10 mistakes new business owners make. Not interested? Then hire someone who is or go work for someone who is.
Don’t take your employees for granted.
Your employees have lives. Really, they do. They have children. They have car troubles and sick parents and dental appointments. Believe it or not, they would rather be at home with their families than working in your office. But, when they’re in your office, they’re doing something important: making you money. Don’t take this—or them—for granted. Offer competitive compensation, good benefits, and, most importantly, an ear for when they want to vent about a professional or even a personal issue. They are, after all, people—and they all want to do the best job they can. Your job is to give them the best environment to accomplish this.
Don’t mistreat your suppliers.
It’s not right when people say to delay paying suppliers in order to help cash flow. How would you feel when this happens in reverse from your customers? When that does happen, you resent it and you give those slower-paying customers less attention than the ones who pay on time. Don’t monkey around with your suppliers. Treat them well. Pay them early. Take discounts if they offer them. But behave as a partner would, because you may need that key supplier in a pinch and, if you’ve got a good relationship, that person will come through.
Don’t get mistreated by your customers.
Some customers aren’t great customers. They treat your people poorly. They complain unreasonably. They pay late and haggle too much. Your goal—elusive as it is—is to do business with people that you enjoy doing business with. You should not fire a customer because let’s face it: We all need customers. But you can price those customers that you would like to see go away a little differently. If they want to behave that way, then they should pay more—that’s your compensation for putting up with their nonsense. Otherwise, let it be their decision to leave you, not yours.
Don’t ignore your customers.
You work hard to get your customers. So, don’t ignore them. Ask any first-year business school student and they’ll tell you that their professor told them that it’s much, much more expensive to acquire new customers than it is to grow your revenues with existing ones. And they’re right. Are you staying in close touch with people who have bought from you in the past? Are you making suggestions or offering them additional products and services that can improve their lives or businesses? Are you showing enough gratefulness with special discounts or incentives for loyal customers? Focus on your existing customers first and the new ones will come.
Don’t forget to pay your taxes.
You hate it. So, does everyone. But it’s a fact of life: taxes are due every quarter. Just because they’re “estimated,” and the IRS isn’t sending you an invoice, doesn’t mean that you’re not required to pay them. You are. When your accountant tells you to pay, then pay. Meet with your accountant a few times a year and maybe you can adjust those estimates, depending on how your business is doing. But do not ignore your tax liabilities—they will quickly grow and could potentially bury you. And it’s not pretty.
Don’t give up equity.
OK, maybe someday you want to go public, or your exit plan involves selling your business for zillions to some big tech company. To do that, you need to bring in investors, venture capitalists, partners, and high-priced employees – then equity would be an important part of doing business with those people. But most of us don’t have these dreams. We want to grow our companies, earn a nice living, build some value, and then one day either pass the company on to another generation or to a buyer. Try not to give up ownership in your company too early or for too little. The more equity you control, the more of your life you will control.
Don’t invest in too much technology.
One of the common mistakes entrepreneurs make is investing too much in technology. If the tech giants had it their way, you’d not only be upgrading their software every month, but you’d also be buying every new gadget that comes on the market as soon as it comes on the market. Don’t do this. The smartest owners use technology effectively and treat purchases like the purchase of any other capital investment: with return on investment in mind. Just because a piece of tech is cool, or fun, doesn’t mean it’s going to benefit your business. Measure the cost of it over a five-year period of time with the benefits it will produce more business, better productivity, and lower costs. If you can get yourself a good return on your money, then buy that tech. Otherwise, invest somewhere else.
So avoid these mistakes from the beginning and don’t learn more about them the hard way!!
Join Connor Business Resources for more great tools and resources!
SOURCE: The Hartford SMALLBIZ AHEAD
By Gene MarksContinue Reading