The Most Common Mistakes Business Owners Make (Part 1)

The Most Common Mistakes Business Owners Make (Part 1)

Every person that I know, have met or heard about that has embarked upon the challenge of starting a business thinks very little of the common mistakes that have plagued most other start-ups. I can appreciate the fact that once the decision is made to own your own business, the lion’s share of energy is placed on the joys and potential successes of what the business can bring. Sadly, the list I am about to reveal required two parts to cover the top mistakes. There are six common mistakes that business owners make. Yes, you can imagine, as you read through part 1 and part 2 that many have been disadvantaged by others. But if you look closely and read the unwritten subtext, all others are part and parcel of the big six. Let’s explore.

Mistake Number 1: Not having a Plan. Now you may be asking yourself, “What kind of plan?” The answer is all manner of planning, specifically a Strategic Business Plan, a Sales & Marketing Plan and a Financial Plan. Lewis Carroll was quoted as saying, “If you don’t know where you are going, any road will get you there!” Planning is more often overlooked by entrepreneurs than any of the other mistakes that I intend to mention.

A Business Plan is the very roadmap that will get you started on the right path and with proper diligence, will keep you on track. I liken it to your GPS guidance system. Put in the destination and you will get a turn-by-turn report of the necessary turns to make. The difference is you will have to sketch out the “turns” and steps that will ultimately lead to the destination. An old insurance adage has come from this statement, “Nobody plans to fail, they fail to plan.”

A Sales & Marketing Plan helps you gain greater insight as to your intended client base so that you can organize a means to market to them and ultimately sell them your product or service. Understanding the demographic in your intended market area and your required sales goals needed to hit your target revenue numbers will keep you from “being all dressed up with nowhere to go”, as well as what channels of advertising and how you will use them.

The Financial Plan is most essential. I’ve said countless times that, “If you treasure it, you should measure it.” Starting with a projection of expected (needed) revenue numbers and planned costs associated with those sales will allow you to understand your cashflow limitations as well as the requirements to keep the business in operation. You start out with two bags of cash, one for all opening costs (i.e. – inventory, equipment, etc. before the doors are open) and the second for operating expenses (i.e. – staffing costs, utilities, and everyday costs to function) once the doors are open. It should also address a contingency should sales not pick up as quickly as anticipated in your Sales & Marketing Plan.  This is what the Financial Plan should address.

Mistake Number 2: Ignoring the Numbers. You can spend all the time in world planning and organizing but if you choose to ignore the research and real time information that exists week by week and month by month, you will find yourself well outside the original plan. It is likely, actually most probable, that the actual costs, expenses and sales numbers you projected will not be exactly what occurs. Of course, you plan for deviations but unless you keep the actual information at hand the opportunity to “adjust the sails” will be out of reach. How much deviation (variance) from the plan should you allow? This should be in the Financial Plan. In my travels as an analyst, I have way too often encountered a business owner who was not paying attention to his financial information. Having a bookkeeper provide you with monthly sales and expense numbers 30 days after the month is over is a recipe for failure. Too little information, too late. Stay informed, stay current.

Mistake Number 3: Trying To Do It Alone.  Warren Buffet was quoted as saying, “If you are the smartest person at the conference table, you are sitting with the wrong people!” Surround yourself with capable, informed people. An accountant, a lawyer, an experienced business owner willing to share thoughts and ideas to help you – this is a good start. Now I’m not suggesting you should have all these people on the payroll but expand your circle of acquaintance to include those who you think might be able to provide you with objective insight into your business. Should you choose to have a partner, recognize what each of you can bring to the table constructively and expand that circle. Two heads are better than one. Every entrepreneur that I have met has told me a story of someone whom they feel that they can “spitball” with in times of question. A mentor, if you will. It may be a friend, a neighbor, a fellow employee from a past job or someone that you can count on and trust. It is not uncommon for a person embarking on a new business opportunity to believe that they can “handle it.” Once you find your circle, you will be infinitely more successful having a “team” that you can call upon when a challenge occurs.

Part two in this little series addresses issues that arise as business operations are up and running over time. Whether you are a start-up, a business with several years operational history under their belt or someone who needs to re-boot, these common mistakes are very will seem obvious, once you see them on paper. It’s never too late to change, adjust, correct or simplify. Planning, measuring and collaborating are all characteristics that successful companies have learned to adopt. Every big company in this country started out small, just like you. Only SOME have become big companies because they have followed the experiences of others. It’s common to learn from your mistakes without you having to make them all. It’s wisdom that allows a person to learn from the mistakes of others.

Coming Soon: Part 2.