Congratulations, you are the owner of a small business. Every day you hear the President and other elected officials extol your virtues and state that, if it were not for you, the economy could never recover. Makes you feel great, doesn’t it. No pressure or performance anxiety here.
It is one thing to be an expert at what you do, if you are not, you won’t be selling products or services for too long. No one wants to buy second rate products. Unfortunately Mr. or Mrs. Small Business Owner, this is just the tip of the iceberg. You can be an expert in your field, but you also have to be extremely knowledgeable in running your business as well.
Here are seven business killing mistakes that you have to avoid. The first three deal with the business and the business owner:
- Time Management: If you look at the calendar and take away the twelve federal holidays, you are left with only 50 weeks in the year to make money. If you plan on working a 40 hour week (and who doesn’t wish for this) you find out that there are only 2,000 hours in the year for you to operate your business. The biggest challenge for a small business owner is understanding the ratio of revenue generating to non-revenue generating hours and then outsource those tasks that do not directly produce bottom line profits. Difficult to do, yes, but it has to be done.
- Attention to Detail: Everything you do directly reflects on your business. You have to be obsessive about details. It is your reputation at stake. The old adage of “…close enough for government work…” does not apply here.
- Advice: You have to surround yourself with experts who will serve as your management team. You have to be comfortable with them and know that they have your best interests at heart. At a minimum you should have these individuals on your team:
- Insurance Agent
- Business Advisor
Unfortunately, they all cost money, but they are experts in their fields and can keep you from making costly errors.
The second three concern the manner in which the company earns and spends money:
- Cash Flow: How does money “flow” through your business? What months are going to be profitable for the business and when will the company have to rely on cash reserves to pay the bills? Is your business seasonal or year-round? While sales are great, you pay the bills with cash.
- Accounts Receivable: You have to get people to pay you and pay you on time. Sometimes easier said than done. A small business owner has to be ruthless in tracking what is due to him or her. What are the standard payment times for your industry and how do yours stand up to them?
- Expenses: Each time a small business owner feels the need to buy “something” for the business, break it down into how much selling will have to be done and how much profit will be required to “pay” for this item. If your profit margin is 10%, that $300 advertisement means that you will have to sell $3,000 in items to pay for it.
The final mistake is letting your emotions run you and your business. All too often, small business owners base their decisions on emotions rather than on factual analysis. Keep it logical and rational and not emotional.
While the above is certainly not all inclusive, any or all of these seven items can, if left unchecked can lead to business failure and bankruptcy. Just a word in your ear.
Jim Carroll is the Vice President of Small Business for the Hampton Roads Chamber of Commerce and executive director of the Hampton Roads Small Business Development Center. He can be reached at (757) 664-2595 or www.hrsbdc.org.