Have you made any of these mistakes? Here are a few of the most common business ones, whether you’re starting a business or already in one, and no matter the business you’re in or how long you’ve been in it.
- Overly optimistic. Living on fantasy and not reality can get you into trouble. A word I often hear is “hope” … “I hope this or that”. Sure, we all hope that we do well, but hope won’t get the job done. Instead, be realistic and always have contingency plans. Spend a lot of time planning, considering every obstacle, and how you’ll deal with that obstacle should it occur. Set goals, standards, and protocols. Make sure your staff is on board and knows what their role is and how to do their job well. Optimistic is good, but like most things in life, “overly” is not so good.
- Not enough cash reserve. It’s all too common for a business to actually spend more than it makes, running in “the red”. Businesses can’t do that very long without failing. Include a line item in your budget (do you have a budget???) for savings. Put away money each month for future expenditures beyond the normal operating expenses, such as new equipment and technology. With rapid swings in the economy, faster than light information transfer, and more and more third-party intervention and regulations, having cash reserves will allow you to weather inevitable storms – because storms do happen. When you end up having to borrow money for the unexpected and already have no room for extra overhead, it’s a tough hole to work out of. And, if you’re the owner, it’s your pay that will suffer.
- Excessive overhead and spending. In our materialistic society, those who have the most toys, lavish homes, expensive cars, and other trappings when they don’t have the financial foundation to support the basic needs and unexpected occurrences often get in trouble – quickly. Every year (or more often), look for ways to reduce each line item in your budget. Set a strong goal of a 10% reduction. Remember, that reduction in overhead goes into the profit category, and if you’re smart, you’ll put some of that in cash reserves.
- Overly trusting and delegating. I often see two extremes: micro-managing and overly delegating and trusting. Both will not serve you well. As a business owner, we all want to do the things that we enjoy most, and many business owners just don’t like to have to be involved in day-to-day operations. The problems with this, I believe, are readily apparent. The other end of the spectrum – micro-managing – has deleterious effects, also, such as staff turnover, lowered productivity, poor staff morale … not to mention the exhaustion that inevitably sets in for the owner/manager who is micro-managing. Like many aspects of life, find that sweet spot where you’re involved and engaged in the business, but not getting in the way of employees who are trying to do their jobs.
- Inadequate financial controls. Most business owners, in my experience, think that if they have money left over at the end of a month, quarter, or year that all must be well, when in fact, they might be practically out of control, with perhaps the business producing very well, giving the owner the feeling that “everything is alright”. If the business is doing very well, there should be lots of profit, and the owner should be able to trace where every penny went. I recommend monthly reports at the bare minimum, provided by the 5th of each following month. Carefully inspect the reports, watch for numbers that are out of line, and get comfortable with knowing what the numbers should be. Learn how to manage a business as if you had an MBA.