Starting a small business takes guts. MEGA guts. You’re going rogue, branching out on your own, being your own boss and bringing your (no doubt) fabulous idea to the market! Big props to you! You had such lofty and sparkly ambitions but a year or two later and you’re sitting in an empty office wondering where it all went wrong. Here are the seven biggest mistakes that lead to small businesses on the road to ruin.
1 Having an unclear purpose
This one seems like a no-brainer but you’d be surprised how many small business owners can’t articulate what their purpose, mission or goals are. This is the cornerstone of all business decisions and your organisation won’t survive without it. Once you formulate this purpose, WRITE IT DOWN! Goal setting is the main way businesses achieve objectives. If you don’t write them down, assign accountability and develop an achievable timeline, it’s hard to calculate progress.
2 Not planning
Small business entrepreneurs tend to be super passionate about their ideas: why else would they have left the comfort of a regular paycheck? Their raw ambition and eagerness to take risks on the job is a big part of making the business a success. Even so, it’s important to remember you have to plan and strategise on how you are going to make MONEY. You can’t just start a business for kicks and expect it to thrive based solely on ideas.
3 Not understanding the market
Marching gung-ho into a market you don’t understand is one of the worst things you can do as a small-businesses owner. If a business doesn’t fully “get” its customers or target market, they will almost certainly fail. How much do you know about other businesses in your industry? How many other people offer your service? What’s your point of difference? Do you have experience in the industry you’re launching your business into? Do your research before making a leap.
4 Not playing to your strengths
If you’re a small business, don’t be embarrassed by your size, EMBRACE it! Bigger is not always better; today, even large corporations are doing their darndest to seem smaller and more personalised. Small businesses already have this going for them, so use it to give your customers the personal attention and flexibility they’re seeking.
5 Ignoring cash flow
We all know profit and loss but how many small business owners know how to read a cash flow statement? The answer according to many financial planners is not many. Most people focus so hard on sales and profits and not enough on cash flow, and since cash crunches are what usually spell the end of a business, learning to monitor this it is crucial. You can make a profit but have negative cash flow. In fact, there is actually no natural correlation between profit and cash flow (MIND BLOWN). If you don’t understand it, talk to a professional. They know their stuff and can teach you or handle it for you.
6 Having your life revolve around the business 24/7
It’s common for entrepreneurs to get so involved in the business that their personal lives suffer. Ultimately, the business will suffer, too. Yes your business needs your undivided attention but make sure you’re taking time out to relax and recoup too. Because you can chop down a tree with a blunt axe eventually, but it would be much more effective, long-term, if you took time out to sharpen that axe.
7 Having an unclear marketing strategy
It’s so important for small-business owners to create a consistent and clear message in the marketplace of who they are and what they offer. Mixed messages will just leave customers confused as to what you do, and that means no sales. Everyone should be receiving the same message no matter the source of their information on the business, and that comes down to marketing and staying on brand.
8 Not paying bills on time
No one likes being chased by creditors, and seeing bills pile up can be a major source of work anxiety. Make sure you keep track of all your bills. Business banking tools such as BPAY View can make this easier by keeping all your bills together in one place without having to chase paper. And with most banking done online, it’s easy to schedule payments up to a year in advance so you can set and forget.