1. Skipping Planning
I’m sure everyone has heard the saying “Failing to plan is planning to fail” – well it is 100% true! I’m not suggesting everybody go away and write a 30 page detailed document of your business plan. In fact it would be better to keep your plan to a succinct 1-2 pages with the goals and action steps for your business. Without clear focus your energy and efforts will be tossed about as obstacles and change inevitably emerge.
2. Poor Financial Record Keeping
We all know the stereotypical image – end of financial year is approaching and out comes a shoe box of unorganised receipts. Maybe you’re a bit more organised but know in the back of your mind your bookkeeping records just aren’t quite right or up to date. Sorting this yourself will waste hours upon hours that could be devoted to your business. Or cost you potentially thousands of dollars if you ask your accountant to clean up a big mess. Keeping up to date and accurate records as you go not only saves you time and money. It also gives you a true picture of your financial performance at any given time. – How can you make the right decisions for your business if you don’t have an up to date picture of how you are performing financially?
3. Not Looking Beyond Your Profit Figure
Whilst it’s great to check out your profit/(loss) each month there is so much more invaluable information you should be looking at! For e.g. which customers are your most profitable, which products deliver the best margin, which customers routinely pay their bills late, where are you bleeding money, which employees are most productive etc. the list of possibilities is endless! By knowing this information you can make very informed strategic decisions to send your business in the right direction.
4. Trying to Make Money by Being Cheap
Of course as a small business owner you need to be wise with spending your money, however being too cheap could get you in a lot of trouble! Instead of trying to do your own finances, marketing, legal etc. all on your own you should outsource. These people are experts for a reason. Messing some of these things up could land you in hot water legally and be very expensive to fix. Not to mention the hours you waste and the stress you put yourself through instead of focusing on what you do best which is providing your product/service to your clients.
5. Poor Cashflow Management
Some small businesses look great on paper but in reality are struggling to pay their bills on time. Cashflow cannot be ignored, it is critical to success. Are your clients paying their bills on time? Do you give your clients 30 days to pay their bill but your suppliers expect payment in 14 days? – These are just some of the factors you need to consider to ensure you have cash available at the right time.
6. Growing Too Quickly
Obviously all small business want to grow! However, if things take off and you can’t keep up and don’t have the right systems in place, everything will come crashing down! If you are growing rapidly then seek help (see point 4 above). Make sure you have the right systems in place and upgrade as you go to avoid a costly clean up exercise.
7. Being Unrealistic About Your Capital Requirements
Starting a business is expensive. Whilst this varies depending what your business does there are still costs which will need to be outlayed. Also new businesses rarely turn a profit in the early days. So if you’ve quit your job (or your hand has been forced) you’ll need some savings to fall back on. Having unrealistic expectations of the costs and of your revenue streams could leave you shorthanded. Spend the time to make a budget of all the expenses you know of and then add at least 10% for the unknown expenses. Trust me they’ll pop up! And make sure if you’re not working another job you have contingency plans in place so that you have enough money to live off for at least 6 months.
I hope this has been a great reminder of things to avoid in running your business. If you need assistance with any of the above please don’t hesitate to contact us for an obligation free chat.