1. Not knowing what phase your business is in…
And not having a plan to get to the next business level. As Michael Gerber states in the E-Myth Revisited, businesses have 3 stages, Infancy, Adolescence and Maturity. Where is your business and how do you get to the next stage. The reality is that we as business owners almost all go through the three stages and the final goal should be to sell the business. Is your business sellable?
2. Lack of or too much professional advice
Ok, it sounds funny, but the money lost that could have been saved just by contacting a professional in any area of need, think taxes, banking, investments, corporate structure, etc., can be enormous and annoying. Now it seems obvious, but if it were so obvious, the saying Penny-Wise and Pound-Foolish never would have taken hold. On the flip side of the coin, if you rely solely on a supposed expert’s advice without doing at least some research on your own, the costs of a mistake may have been bigger than not seeking that advice in the first place.
3. Thinking you can manage Time
You can not manage time; you can only manage yourself around time by changing your mindset and habits. You can not add more time to your day or stop the unending movement of time; you must manage yourself first by being conscious of your daily schedule. Prioritizing, delegating and scheduling are things that should be on the front of your mind in everything that you do, and be flexible, especially towards the things most important to you.
4. Thinking about taxes after the year is over
Taxes are a subject many you may be putting off until the last minute. This procrastination costs money in the form of paying more tax than is required. One of the reasons business owners fail in their tax strategies–besides not having any–is because they neglect to seek knowledge and advice BEFORE they engage in any activity that has a taxable effect. If you’re serious about saving money on taxes, learn to consider tax ramifications BEFORE you act. Planning is the key to reducing the amount of taxes you pay each year. Since taxes represent a large expense in any business, it’s absolutely essential that you do everything possible to minimize the cost. This means getting a grip on your taxes BEFORE and DURING the tax year, not after.
5. Let emotions get in the way of sound business decisions
Some people get consumed with their emotions and frequently make business decisions for the wrong reasons. Examples of this include spending money on sexy, expensive advertising just to boast or beat their chest. Other examples include keeping unproductive employees because they feel sorry for them, or going out and spending crucial capital on equipment that isn’t needed yet. To make good decisions, make sure you rely on the facts and sound business judgment and a little bit of your gut.
6. Going against your gut
Intuition is just as important in business as it is in other settings. You’d be amazed at how many gigantic corporate deals are go or no-go because of some CEO’s gut feeling. While you might think that logic is the language of business, that’s far from reality. If you base all your business deals on hard logic and ignore your intuition, most likely you’ll be in for a world of hurt. We humans aren’t very logical to begin with. We simply don’t have enough data to make truly logical decisions because business deals depend on human beings, and we don’t have a logical system for accurately predicting human behavior. Not being able to predict how other humans will behave is a pretty big gap in our logic. And intuition has to fill that gap. The real performance of human beings is what makes or breaks business deals. But to assume everyone will perform as expected is unrealistic in the extreme.
7. Being too formal
Business is built on relationships. In some settings a certain degree of formality is appropriate, but in most business situations, being too formal only gets in the way. Business relationships work best when there’s a decent human-to-human connection behind them. I think it’s a mistake to be too formal even when looking to establish new business relationships. Human beings don’t want to build relationships with faceless corporations.
8. Selling to the wrong people
While sales are important to the survival of any business, you don’t need to push your business on everyone you meet, including friends and family. Furthermore, it’s a waste of time to try selling to people who simply don’t need what you’re offering. Selling to the wrong people includes trying to sell to everyone. Some customers are much easier to sell to than others. Feel free to say no to customers that are more trouble than they’re worth. Let your competitors sell to them instead. You’ll save yourself many headaches, and you’ll free up more time to focus on serving the best customers. Just because someone is interested in doing business with you doesn’t mean you should accept. Don’t network with random people just because you think you’re supposed to network. Most relationships simply aren’t worth pursuing. Learn to say no to the weak opportunities so you have the capacity to say yes to the golden opportunities.
9. Failing to focus on value creation
It’s easy to fall into the trap of thinking that the purpose of a business is to make money. But the real purpose of a business is to create value. While it’s possible to make money in the short run without creating much value, in the long run it’s unsustainable. Even criminal organizations have to create value for someone. When you know your business is just sucking value away from others without providing anything in return, it will erode your self-esteem, and the business won’t be much fun to run. Why does your business exist? It exists to provide some sort of value, both for you and your customers. The better you understand what value you’re trying to provide, the better you’ll be able to focus. Too often business owners aren’t clear on what value they’re trying to provide. They just sell stuff and hope for the best. That’s a lousy business model. The world doesn’t need more selling or more stuff. But it always needs and wants genuine value creation, and that’s where you should direct your efforts.
10. Too little cash and not managing it
It’s a mistake to be too stingy with your cash. Don’t let frugality get in the way of efficiency. Take advantage of skilled contractors who can do certain tasks more efficiently than you can. Buy decent equipment when it’s clear you’ll get your money’s worth. It takes time to develop the wisdom to know when you’re being too tight or too loose with your cash, so if you’re just starting out, get a second opinion. Often the very thought of getting a second opinion makes the correct choice clear. If you can’t justify the expenditure to someone you respect, it’s probably a mistake. On the other hand, there are situations where it’s hard to justify not spending the cash.
That being said, the cash that you do have needs to be managed properly, like my old business partner said, “I want to squeeze every dollar for all we can!” He was talking about getting the most out of every dollar our clients gave us. Not to be satisfied by getting a low interest rate in a checking account when there are thousands of opportunities for cash… CD’s, Cash Equivalent Instruments, the list goes on. Get the most interest on your cash that you can!
11. No Mission
Do you have a written job description? Do you know your core functions and work objectives? Even as a solo-entrepreneur, there is a need for a written job description. A job description is a written summary listing the elements of a particular job, purpose, duties and equipment needed. It provides an organized plan, determines work objectives, explains core functions and gives clarity to what is important to you and your business. It gives you a plan and direction of your work flow. Your job description is a good place to include your mission statement. Your mission statement outlines you and your organization’s vision, why the organization exists and what it hopes to achieve in the future. Also it serves as a resource to monitor your performance and measure if you are meeting your business objectives. Steven Covey, author of “The 7 Habits of Highly Effective People”, states that a mission statement is a “connection with your own unique purpose and the profound satisfaction that comes in fulfilling it.”
12. Focusing on cost not value
“How much does that cost?” How many times a day do we ask ourselves that? Sometimes we need to take a step back and ask ourselves whether or not it’s a good value. We know that a BMW costs more than a Hyundai, but we know that higher value comes with a higher cost. We should evaluate value with everything that we spend our hard earned dollars on. Look at everything we spend money on, advice, furniture, taxes, staff, the list goes on. Just remember, Cost or Value!
13. Not having a plan to sell your business
Initially, we all want to be in business for ourselves, and then we slowly start to understand what it takes to run a successful business. Ideally, we move our business to the position of being sellable. Do you know how much your business is worth? Have you had a business valuation? Many business owners think there business is worth quite a bit more than what the market will dictate, and from my point of view, assume that the proceeds from the sale will be plenty to live off of. They end up not having enough liquid assets to supplement the sale of a business to retire comfortably on. Make your business sellable, and know how much you can sell it for. Just because you can sell it, doesn’t mean you have to, but you should know what its worth!
By Alyssa Faber