The Most Common Mistakes Business Owners Make (Part 2)

The Most Common Mistakes Business Owners Make (Part 2)

If you’ve read Part 1 in this series you will have recognized that they are a broad list of three common mistakes that deal primarily with planning, organizing and measuring. Not only are they relevant for start-up businesses but they apply quite significantly to those who have been in operation for years. It’s never too late to stop, think and re-group your business.

The next three common mistakes pertain mostly with business that have been in operation, mostly for a period where the challenges grow, and likely without a fix, will continue to grow. It’s quite rare, like many challenges, they will go away. Most people with their own business have a reasonable understanding of the operations and mechanics of their industry. They have more than likely been doing similar work for someone else and decided to do it on their own. But in most cases, to use a metaphor, the machine was built, all they had to do was run it.

As a quick refresher, the first 3 Common Mistakes that Business Owners make are as follows:

Number One – Not Having a Plan

Number Two – Ignoring the Numbers

Number Three – Trying to Do It Alone

Let’s move on…

Mistake Number 4: Employee Productivity.  The use of the word “productivity” is more encompassing than you might initially think. It includes the values of effectiveness and efficiency. Effectiveness is doing things right, whereas efficiency is doing the right things. BOTH are critical to productivity. I look at the manner of operations, the time devoted to tasks, and always looking for a better way to accomplish them. This refers to machines, logistics, financial data collection. The people responsible for these and all other facets of the business will work in synchronicity because you know what you are doing. Over time, shortcuts and lapsed processes occur that will affect the end product.

This hearkens me back to Mistake Number 2 from Part 1 of this series – Ignoring the Numbers. Having effective measurement tools assigned to tasks, costs and expenses with “alerts” for unfavorable variances helps minimize deviations from the target. Additionally, goals, objectives and clearly defined job responsibilities for all staffing helps mitigate such deviations. The company goal is profit. Managing and motivating your staff to understand how their role is contributing to the goal is a primary objective. Let’s not forget, all staff must be simultaneously engaged in what their “WIIFM” is… “what’s in it for me?”.

Mistake Number 5:  Running Out of Cash.  Cashflow in a business is a most curious thing. I have witnessed companies that have run low on cash as result of having too little business, understandably, while this can also be a condition of a company with too MUCH business. How can this be? If you look long and hard at the financial aspects of cashflow it can be easily understood. Cashflow is the net balance of cash (or cash equivalents) moving INTO and OUT OF a business at a specific point in time. If a particular operation or task takes too long, or a repair and maintenance event occur, this affects cashflow and necessarily profit. If a substitute process or deviation occurs to complete an operation within the business, this will also affect cashflow. Inevitably, accidents and deviations are seldom beneficial to positive cashflow.

“Budget” is a word often likened in appreciation with the word “diet”. Nobody really likes to think about that. If you’ve planned for expenses and costs in a way that has proven success or history, the likelihood of deviation is considerably less. Measuring the costs along the way tells you this information. However, in the example where you have too MUCH business to handle, the consideration becomes how fast am I collecting money to supply inventory and re-stock to maintain process and operations is the other consideration. Hate to beat a dead horse, pardon the expression, but financial planning is critical.

Mistake Number 6:  Recognizing Changes in Market Demands.  Speaking of horses, how many buggy whips did the tack shop have before horse and carts were replaced by motorized vehicles? How in the world did Blockbuster end up going bankrupt when it was a thriving business for most consumers to satisfy their weekend’s entertainment? How about Kodak… when was the last time YOU bought a roll of film? These are all obvious and dramatic examples of change in the world of technology. With fads and ever-changing purchasing whims of consumers, keeping an eye on product lines and services becomes incumbent on all business owners.

It was only in recent years that names like Uber and Lyft became part of our everyday lexicon. Do you suppose this had any impact on the licensed taxi business? My focus and interest have always been on the small businesses that are tangent to the big ones. Another example would be the small business whose mainstay of revenue was repairing and replacing VHS equipment. The online purchasing has had a dynamic impact on retail businesses not to mention what is being sold and purchased online. How a business owner can remain relevant with their product or service must always be a consideration. John Lennon was quoted as saying, “Life is what happens to you while you are busy making other plans.” Staying focused on the financial aspects of your business while staying relevant in the marketplace are quite literally the most critical aspects of running a business. And here you thought it was going to be easy.

In review, you may see many other mistakes that can occur in a small business. I believe that a summary of the 6 MOST common encompasses an entire list (if there ever was such a thing) if you look closely at the implications within each mistake. I think I can sum up my research and experience in small business concerns with a simple quip from P. T. Barnum who was quoted as saying, “Aside from a few million details, that’s all there is to it!”

Steve McCrillis – Analyst, Advisor, Author, Publisher