There are certain major mistakes that you need to avoid while running a small business. Chances of your small business succeeding are slim if you make any of these major mistakes. Conversely, chances of your small business failing are lower if you take the trouble to avoid these major mistakes. In this article, we will be highlighting the said major mistakes, which you need to avoid at all costs if your small business is to succeed. We will also try to give hints on what you can do to avoid making those mistakes.
Without any further ado, the major mistakes you need to avoid while running a small business include:
Mixing your personal finances with the business finances
It is very important for you, as a small business owner, to understand how to separate your personal finances from your business finances. Ideally, you should pay yourself a salary for the work you do within your business (and that is the only money you should be drawing from the business on a regular basis). Otherwise if you mix your personal finances with the business finances, you may start withdrawing (business) money that you aren’t supposed to withdraw, to spend on your personal stuff. The business will then start suffering from cash flow issues, because you can’t keep on drawing money from a business in an unplanned money without consequence. Alternatively, your personal finances could start suffering – especially in a situation where you have to keep on drawing on your personal funds to prop up a non-performing business.
This is of course not to say that you can’t use your personal funds to finance your business. Neither is it to say that you can’t draw funds from your business for personal use. Rather, what we are saying is that you need to have a proper framework for separating your business finances from your personal finances. In some cases, whenever you draw business funds for personal use (over and above the salary you pay yourself), you may consider viewing it as a ‘loan’ which you would repay to the business later. The idea is for you to assume that you were a professional manager, hired by the business’ directors to run it. If that was the case, would you just be drawing funds from the business for personal use? Or conversely, would you be just using your personal funds to finance the business without proper accounting? Whatever you do, just ensure that your personal finances are properly separated from your business finances.
Being fixated on certain ways of doing things
As a small business owner, you need to be open to change. The environment within which most small businesses operate is very dynamic, and the way things are being done today may not be viable next week. You therefore need to be ready to change with the times. Otherwise if you insist on continuing to do things the way they have always been done, you may find that you are unable to face new market realities. Or you may find that you are unable to retain staff for long. Or you may find that you are unable to keep up with the competition… The most important thing here is for you to be continually studying the environment within which you are doing business, and changing your way of doing things whenever the environment demands that you do so. This may admittedly mean at times having to change your entire business model or diverging from your original business plan. But the most important thing is to avoid being fixated on a certain way of doing things.
The problem with overworking yourself is in the fact that you are likely to soon or later start suffering from burnout. That is in turn likely to make you less effective at running the small business. Haven’t almost all of us at some point encountered business owners who are always in a foul mood? And is it not true that when you investigate the genesis of it, you tend to find that it is as a result of them chronically overworking themselves? Try to ensure that you don’t go that route – as it is risky not only to your business life, but also to your personal life. The most important thing here is for you to know how to delegate tasks to other people within your business. Another important thing is to ensure that you create proper systems within your business, and train your employees well enough for them to be in a position to implement those systems reasonably well on their own. You also need to trust other people, and overcome the idea that you are the only who can do things properly. You may be surprised to learn that properly trained and empowered employees can actually perform certain sensitive tasks better than you could!
Being too tight with the money
We have always been told that you need to spend money to make money – and it is true. As a small business owner, if you are too tight with money, you will almost certainly end up in difficulties. At best, your business may not attain its full potential, on account of you being too tight with the money. At worst, your business may collapse, on account of you being too tight with money. Being too tight on money may, for instance, mean that you end up hiring unsuitable people for the various roles in the business (in a bid to save money). Or it could mean that you end up hiring too few people (in a bid to save money), leading to poor productivity and high rates of staff turnover in the long run. It could also mean compromising on your business processes, leading to poor quality products or services which in turn would cause the customers to look elsewhere…
As a small business owner, you can’t afford to be too tight with money, but neither can you also afford to be too loose with your money. Finding the right balance is the challenge. The most important thing is to ensure that you don’t compromise on important things within your business in a bid to save money. Where you have to save money, you need to figure out how you can do so without compromising your business’ standards.