While every entrepreneur wants his or her business to succeed, some of them do fail and that’s often due to common mistakes. Managing a business is never easy and, as new small business owners, some of those business owners don’t adapt quickly enough. Learning about these common pitfalls and how to avoid them can give you an edge in helping your own business thrive.
Failing to Maintain Sufficient Capital
Many small business owners start their businesses without enough capital because they don’t think ahead. As a result, they end up using their personal credit to fund business expenses, which hurts the business owner personally and professionally. Once you begin down this path, it won’t be long before bankruptcy is your only way out.
Finance experts advise small business owners to raise enough capital to cover their first two years of operating expenses. This is in addition to raising the capital needed to start up the business. By raising that two-year buffer, small business owners can avoid the financial mismanagement that can lead to the destruction of the business.
Failing to Get Insured
Another mistake that small business owners make is neglecting to get liability insurance. In fact, one-third of all new business owners think they can get by without it, but regret the decision in a short time. Even though the business may not have been at fault, it’s common to become the target of a lawsuit. Without liability coverage, you’re looking at paying attorney fees, court costs, and a possible settlement all out of pocket.
The solution is simple, though few new small business owners want to face it. By consulting an insurance provider, you can determine how much coverage you need to keep your business protected. While this represents an added expense, the amount you pay in premiums will pay off, if your business is sued within those first few years.
Spending Anticipated Revenue
Another common mistake small business owners make is not using business loans and other sources of capital responsibly. They may hire more employees than their small business can reasonably sustain, or they may pay themselves an inflated salary. They may also buy or lease equipment that they really don’t need to service their current amount of customers. While they may have good reason to expect enough growth to support these expenses, there’s no guarantee success will be immediate.
The best approach is to spend your money more frugally. Pay yourself a minimal salary and hire only those employees you really need to keep your business operational. Similarly, buy or lease the equipment you need to satisfy customer demand. You can upgrade after your business starts to grow.
Poor Leadership Skills
There’s a direct relationship between how you manage your employees and how well they treat your customers. Poorly managed employees will experience lower morale and won’t feel motivated to stay productive. They will also be less interested in providing quality customer service.
The best way to solve this issue is by increasing your knowledge of leadership strategies. You can take training courses, read books about leadership styles, or take online seminars to give you a better grasp of successful leadership techniques. When you can relate better with your employees, they will feel more valued. This will inspire improved productivity and better customer relations.
Managing a small business is a complicated endeavor, requiring you to give equal attention to financial management, leadership, and customer satisfaction. Taking on a more frugal business approach, while helping your employees feel valued, can go a long way towards helping you avoid common mistakes. By taking the time to protect against the pitfalls mentioned here, you can give your small business the best chances for success.