The 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.
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.
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.
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.
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.
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.
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
SHANNON RYAN, CFP®
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