Learn how to avoid 5 Big Mistakes Small Business Owners Make. Owning a small business can be a challenging and life-consuming endeavor. Ask any business owner and they will most likely tell you that their life revolves around their business. Taking good care of something that receives so much of your time, effort, thoughts, and money should be the top priority for an entrepreneur. Much of the time we want to focus on the “fun stuff” when it comes to running a business, like choosing which inventory to stock or designing a new website, and sometimes it’s all of the immediate and important things that need to take the spotlight, such as hiring a new employee or running payroll for the month. When those tasks take up all of the hours in the day, some of the most vital things get overlooked or pushed to the back burner. Here are 5 big mistakes that small business owners make, and how to avoid them.
Number 5: Not updating marketing techniques and customer service as technology changes.
As times change and technology advances, businesses that are able to adapt and take advantage of the new technology will be the most successful. Technology and the internet have completely changed the face of certain industries, just take a look at retail stores for example. eCommerce businesses like Amazon has put mega stores like Toys-R-Us out of business. However, the retail giants like Target who have been able to capitalize on using the internet to capture online shoppers have only expanded their online products and services. You can now shop and buy everything you need at Target online, drive over to the store, pull up outside, and they will deliver it to your car. When it comes to convenience and service, they have nailed it.
Convenience and service is exactly what today’s consumers are looking for. The same goes for small businesses too. Look for ways that you can leverage your product or service online. How can you offer better service to your customers using the latest technology? Decide what’s the most cost-effective and biggest bang for your buck. Investing in technology can sometimes be expensive, so make sure that you add tools that will yield the highest return to your bottom line.
The number of businesses that are listed for sale that don’t even have a website or social media accounts is surprising. Just having the basics can really push a business forward. Setting up a website that would allow you to sell your products online, as well as in-store would dramatically boost sales if marketed correctly. There are small changes that could be made which would positively affect revenue and attracting new customers.
Number 4: Not keeping procedural manuals for key positions.
If you have an employee suddenly quit or give their notice, not only do you have to take the time to hire a replacement, but someone will need to do their job in the meantime. Do you know exactly what they do and in detail how they do it? If not, stop what you are doing right now, and ask each of your employees in key positions to document all of their processes and procedures. They should account for their daily activities, and detail how to perform their tasks. It should all be written out so that a new employee stepping into that position could learn their job with minimal hands-on training from the boss. A written and detailed training manual will help immensely when onboarding new employees or even during a possible handover to a new owner.
Having a formal onboarding process isn’t just for the large companies. The statistics make it very clear that spending time and effort on your employee onboarding matters. 69% of employees are more likely to stay with a company for three years if they experienced great onboarding. Furthermore, up to 20% of employee turnover happens in the first 45 days, so investing in your new employees in the beginning has a payoff that will be well worth the effort.
Number 3: Not following a business plan.
You wouldn’t leave on a road trip without a destination in mind. You would use GPS or at the very least a map to help you figure out how to get where you want to go. The way that you approach running your business should be no different. Without a business plan, how to you know where your business should be in 6 months, a year from now, or 10 years out? What are the goals that you would need to hit in order to be successful? How many sales do you need to make to pay the expenses of the business and earn you a profit? Without creating, monitoring, analyzing, and updating your business plan, it is difficult to answer those questions.
Create a business plan for your company that has measurable goals, realistic projections, and flexibility. Do a periodic analysis of your business to see if your business is performing according to your projections, and then adjust what you are doing in order to meet your goals. Your business plan should be a living and evolving road map to your business’s success. Use it to help guide you towards making key decisions, in order to drive your business forward.
Number 2: Not keeping good financial records.
When it comes time for a business to sell, having good financial records is one of the most important aspects that will not only bring a higher purchase price, but it will make the business more attractive to prospective buyers. Unfortunately, many business owners fail to keep adequate financial records, and that hurts them when it comes time to sell. Here are some of the best pieces of advice when it comes to record-keeping:
The bookkeeping software available today, such as QuickBooks, is extremely user-friendly, has good technical support available, and is relatively inexpensive. You can link your business bank accounts and business credit cards to the software, and it will keep track of the transactions for you. It is easier than ever to do your own bookkeeping, but if you prefer to hire it out, there is always the option of having a traditional bookkeeper on your payroll. Either way, keeping accurate financial records is vitally important.
Many small businesses are cash-based or very cash heavy. It is important to be able to prove the amount of cash that you do bring in, even if it’s not formally reported, because when the time comes to sell that business, a prospective buyer is going to want to see how much cash is actually coming into the business.
Also, it is common for small business owners to include personal expenses in with their business expenses on their tax return. If they are not truly business expenses, then be prepared to show records and receipts to prove that they are in-fact personal expenses. When a business is selling, a potential buyer will want to see what the true expenses of the business are.
Number 1: Not having an Exit Strategy.
Having an exit strategy is often viewed as irrelevant to business owners who love their business and have no intention of selling or closing up shop any time soon. However, what happens when something unexpected comes up, such as a health issue that forces you to stop working and you can’t run your business any longer? Even if you have a one-person sole proprietorship, you need an exit strategy.
87% of American businesses never get sold, because the majority of business owners don’t run their business in a way where they can legitimately sell their business-they have no exit strategy and the business just closes. After all that work to get it up and running, and years of working to get it where it is today, it’s a shame that so many business owners just walk away when they are finished. Having an exit strategy worked out in advance helps ensure that you have the chance to get extra money out of your business and it also gives you some control over your small business's future.
Keeping a clear exit strategy in mind will not only help to get you the top market value for your business when the time does come to sell it, but you will have a clear plan in place if something should unexpectedly happen that prevents you from continuing to operate the business.
If you run your business as if you are going to sell it (even if you have no immediate plans to do so), you operate differently. Your books and financials are clean and organized, you run the business more efficiently, your employees are highly trained, your processes and procedures are well-documented, and most importantly, you will have a clear exit strategy.