There's a good chance that you're tired of hearing about high failure rates for small businesses. To come this far, you have beaten the odds, defied conventions and piloted around the naysayers many times over. Above it all, you found a way to maintain your enthusiasm and get up every day to do it all over again.
In that case, here's some good news for you. U.S. business failure rates have been declining over the past few decades. Entrepreneur magazine identified one of the major reasons for that is “smarter small business owners.”
Take a moment to congratulate yourself, but only a moment. Then it's time to get back to work and avoid these common mistakes.
Failure to Plan
Energy can only get you so far if you don't have a plan. To smooth out the spikes and troughs of revenue streams, you'll need to devote resources to planning, including a business plan, a financial plan, a marketing plan and a strategic growth plan. Those who don't plan end up reacting - which is a sure pathway to falling behind.
At first, co-mingling of accounts was inevitable because your business was your life. The mistake is letting that situation go on too long. You have to maintain separate bank and credit accounts for your business. Every tax accountant will tell you that it has to happen sooner or later; and the sooner the better. The bigger lesson here is that it's rarely a good idea to handle tax issues yourself. You can't be an expert in your own business and in the changing tax codes. Tax professionals are worth the investment for the peace of mind alone.
One of the top reasons businesses close their doors, even profitable businesses with plenty of customers, is that they simply run out of cash. Get help putting together detailed cash flow statements that include dates, reliability scores for accounts receivable, and failover cushions in case things don't go as planned. When a client or customer misses a payment, it can trigger a financial cascade with devastating consequences. Don't be surprised. Keep an eye on your cash.
Missing the Market
If you run a gas station or a nail salon, your location may be the biggest factor in your success (or at least survival). For most other types of businesses, you need to stake out a distinctive position. Being merely normal is fatal. Read “Positioning: The Battle for Your Mind” by Al Ries and Jack Trout. Be the company that others have to react to.
Killing with Kindness
After working so hard to sell the business to everyone you meet, it can be difficult to shift gears and fire someone who's working for you. Many small business owners just can't do it, so they end up holding on to bad employees. Wayne Rivers of the Family Business Institute calls this the “one common, virtually universal mistake small- and family-business owners make.” Bad performers hurt everyone else on the staff. Take care of your business and do the right thing.
In case you are wondering about how small business owners became so smart recently, the most likely answer is the internet. Business advice in blogs like the one you are reading now have democratized information and made it easier to learn from the mistakes of others. Wisdom is the ability to apply old information to new situations in original ways and wisdom like that will put the odds in your favor.
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Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.