Financially Real

5 Common Mistakes Small Business Owners Make

5 Common Mistakes Small Business Owners Make | www.TheHeavyPurse.comThe cliche, “the grass is always greener on the other side of the fence,” is one we’ve all heard before and like most cliches, it also has a kernel of truth to it as well. Many people spend their entire lives coveting what others have, believing their life to be superior. This includes the assumption that being your own boss is better. Most people can spend hours sharing horror stories about bosses and co-workers, which can lead some to view owning a business through rose-tinted glasses. While there are many benefits to owning your business, it is also hard work too.

There is nothing better than seeing all your hard work (not to mention the money you invested) pay off as you build a sustainable business. And there is nothing more crushing to watch a business come apart at the seams and wither away. I’m in the unique position where I’ve witnessed this from multiple sides as a leadership coach/consultant to small businesses, a financial advisor to small business owners and as a small business owner myself. It’s my observation that it takes time and effort — and maybe a little kismet — to build a successful business, along with some good strategic planning and money management. Sadly, like most things, it seems to fall apart much easier.

The Biggest and Most Common Mistake Small Business Owners Make …

They don’t think big picture or long-term. This isn’t anything revolutionary, which is why it is what separates successful from struggling businesses. A lot of effort goes into launching a business, creating your services and products and developing a short-term plan to build a viable business. But then what? Savvy and successful business owners are always looking to the future, which you must do too if you want your business to last.

5 Dangers of Not Seeing the Big Picture

For most small business owners, the success of their business is deeply intwined with their family’s success and financial well-being. When one falters, so does the other. While there are certainly factors outside of our control, these are five common mistakes that many new and seasoned business owners make because they didn’t think big picture. The good news — all are also fixable.

1. Being Reactive Versus Proactive

This is probably the most common mistake. Unless your business requires you to have employees immediately, such as a restaurant, most new businesses start out with just one person. This one person has to wear many hats from CEO to marketing to accounting to the person answering the phone or greeting customers while also providing the service or building the product. At first, you don’t mind so much because you’re in the honeymoon phase of your small business. But, over time, you get stuck in the day-to-day minutiae of running your business. You react versus being proactive and strategic. You do tasks that are important and needed but don’t necessarily need to be completed by you. Or to be blunt, shouldn’t be completed by you.

Don’t let yourself get caught in this trap. I understand that initially you may need to do all the tasks yourself but plan for the day when others can assist you. I’ve also heard plenty of excuses as to why hiring help wasn’t possible, mostly revolving around not being able to afford it. In some instances, it was true. In others, less so. They simply weren’t keen to see lower profitability or use business loans to offset the cost of hiring help. Again, you have to carefully crunch the numbers to know what your reality is but also don’t be short-sighted and forget to think big picture. You may see lower profits initially but what about long-term? Now that you’re no longer doing tasks that don’t earn the business money, you should have time to focus on acquiring more clients and building the business, which should lead to higher profitability long-term. Even if you don’t think you need staff, also be mindful of how much time you’re spending on non-earning tasks to make sure it’s not eating up too much of your time.

Your To-Do: Determine what tasks you would ideally like others to do and set markers as to when you would like that to happen. How much would the business need to earn before you could hire a bookkeeper, an assistant and so on? Figure out what tasks consume your time but don’t earn you money. You need to be able to clearly delineate what tasks only you can do and what tasks could be given to others.

2. Lack Clear Mission or Game Plan

If you’ve ever worked in a large corporation, you’ve probably sat through countless big and small meetings on what the company’s vision is for the upcoming year. What their chief priorities are, and more importantly — how you can help your company be successful. You may have moaned and groaned your way through a few of those meeting, but they served a valid purpose: to clearly outline company goals and your responsibilities. Does your small business have a clear mission, yearly goals/priorities and a long-term game plan? One that is communicated to your family, employees/contractors and clients (as appropriate)?

When I ask those questions to small business owners, I receive a fair amount of mumbling until many admit they don’t have anything more specific than “be profitable” or “earn more than last year”. Being profitable and showing growth are outcomes that all business owners, big or small, want to see, but how will you achieve your desired result? Wanting isn’t enough. You must take action by setting clear goals, so you can build a plan to achieve them and use your goals to guide your decisions.

To Do: Just like you need to create short-term and long-term goals for your personal life, you also need to create them for your business. Review monthly and if you have a team, review progress with them quarterly. Don’t keep them in the dark. Their livelihood is tied to the success of your business too, so make sure they know what they need to do to keep your business healthy and themselves gainfully employed.

3. Products/Services Stagnate

The world is constantly evolving and our products and services must evolve with it, if we want them to remain relevant, in demand and profitable. Consider the music industry who struggled to adapt to MP3s and now a streaming world. Or former Microsoft CEO, Steve Ballmer and others who dismissed the threat of Apple’s iPhone when compared to the millions of phones they were selling at the time. And we all know how that story ended. It’s great when you have a product and/or service that is popular and profitable, but you must remember that the public is fickle and craves newness. Going back to Apple, they didn’t create the iPhone and walk away. They continued to enhance and innovate the iPhone and create other products and services to remain relevant and to lead, rather than follow.

These are lessons small business owners need to take to heart too. It’s easy to get complacent or think your product/service is recession-proof or will always be in demand. Even if your product/service remains the same, you still likely need to evolve how you position and market it. Consider the evolution soda companies are currently facing. For many years, their greatest battle was whether Coca-Cola or Pepsi-Cola was better. But now, they face dropping sales because consumers are concerned about soda’s link to obesity and other potential negative health effects. They have had to adjust their messaging and now have ads where they talk about balancing soda with healthy snacks and exercise. One thing I know for certain is that people’s desires and needs change, sometimes slowly, but a successful business owner is nimble and adapts.

Your To-Do: Take stock of your competitors, both big and small. How are they evolving and why? Are you still experiencing growth or has your business begun to plateau? Regularly survey clients to ensure your meeting needs but also to understand any additional services/products they want and you can deliver.

To Be Continued …

I’ve covered a lot of information and want to give you some time to digest it. I’ll share the last two mistakes on Friday and we’ll go deep on buying/selling your business too.

What were some of the mistakes you made when launching your business? How did you fix them?

Shannon

July 13, 2015  •  12 Comments  •  Financially Real

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Comments

  1. Monday, July 13th, 2015
    Lacking a clear mission / vision ins a huge problem for small business owners (and large business owners for that matter). It's something that needs to be articulated early on and with decisiveness to be successful. Your customers will increase from having a clear mission, in my opinion.
  2. Monday, July 13th, 2015
    I agree with these three Shannon especially with the third one. It took us lots of meeting and time before perfecting our menu (coffee) and pastries. What we did was that we had to conduct survey and got comments and suggestions of our customers about the products we were serving. Until now, we still do it more often so that we are updated about what our customers like and basically what to improve. We know that the competition is tough!
  3. Monday, July 13th, 2015
    Excellent points Shannon! We've seen some of them ourselves with other business owners and have been guilty of some with ours. The biggest one for us has been stagnating. This was especially true in the beginning, though can still crop up at times. Things are going great and we sit back, resting on our laurels, instead of finding ways to catapult what's going on and not looking for ways to grow. That being said, #1 is a huge one. It took us some time to get there, but hiring others has been a huge part of our growth. We, of course, can't do everything and the expense can be well worth it if you do it wisely.
  4. Monday, July 13th, 2015
    I've resigned to the fact that if I want to create the best product, I need to hire certain people. Instead of it "coming out of my budget," I deduct from the amount I made on the project to people I need to pay first who are helping me. Then at least I know I'm creating the best product (in this case video) that I can. As long as Im making some profit instead of going into the hole, it can be worth it.
  5. Monday, July 13th, 2015
    Although I am not a small business owner, I believe that the "lack of a clear mission or game plan" can apply to many decisions we make in life. For example, if someone wants to start a blog to make money, what is the plan to make that happen? You can't just throw together a post and just hope someone will see it and pay you gobs of money. If you don't have a plan laid out, expectations won't be met and goals won't be reached!
  6. Monday, July 13th, 2015
    I made the mistake of paying for services that I didn't really need. There are a number of professionals out there who will try to convince you that you need to pay a bunch of money for their "expertise" however with a little time and energy, you can definitely do it yourself.
  7. Monday, July 13th, 2015
    Your question assumes that the mistakes were fixed ;) I think the biggest problem I am running into is a stagnant product. I think my writers and I do a great job of putting out high-quality content, but I have had a difficult time getting all the "extras" in place, such as a great user interface & design, high quality "extras" like ebooks and tools, and other things that are needed to take a content website to the next level.
  8. Tuesday, July 14th, 2015
    I've been guilty of trying to wear too many hats because I thought no one could do things as well as me. No one really does things exactly as you would, but that doesn't necessarily mean their way is wrong. I would advise business owners to delegate more and don't get so caught up in the fact that people arrive at successful outcomes by different means.
  9. Tuesday, July 14th, 2015
    Just this week, my husband was able to tell me that his gross revenues for his small business this year have exceeded the best of his gross salaries as an engineer in high-tech. He went through 6 years of low income and underemployment after the high-tech bust of the early millennium before launching this business. To have come to this point after so much fear, uncertainty, determination, and hard work is so healing! I'm going to share with him what you say about putting off hiring someone to help. He's done it all on his own for exactly the reason you state (cost), but I think it's time to take on an employee and avoid burnout. I look forward to Friday's post with your last two common mistakes.
  10. Tuesday, July 14th, 2015
    Great post Shannon! As I approach full-time self-employment, these are all things I'm thinking about because I don't want to find myself quickly in a position where I'm scrambling for a JOB again due to these mistakes.
  11. Wednesday, July 15th, 2015
    Not having a niche was my biggest mistake. I thought that I could be a one-stop-shop, but when I saw that so many people had the same lack of focus than me (and were better at marketing it), I got frustrated. Now that I have a very specific focus with a target audience, I am attracting stronger, more loyal clients.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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