Life as a business owner means dealing with a daily dose of challenging decisions, any one of which can have a significant impact on operations. Here are ten costly and common mistakes made by SMEs - make sure you don't fall into the same trap!
The DO's and DON'Ts of running a small business:
1. DON'T try to do everything yourself
2. DON'T mix your personal and business finances
3. DON'T forget to develop an appropriate risk mitigation strategy
4. BE SURE TO chase payment of invoices promptly
5. DON'T rely on a small customer base
6. BE SURE TO act quickly to address problem employees
7. BE SURE TO conduct thorough market research before you go into business
8. BE open to change
9. DON'T forget the parts of the business that don't interest you
10. DON'T ignore the customer
DON'T try to do everything yourself
Undoubtedly the most common mistake made by SMEs is that they try to do everything themselves! Never underestimate the importance of learning to delegate or the importance of seeking outside help. You must learn to focus on what you do best and pass off the rest to others, whether they are internal staff or external consultants.
DON'T mix your personal and business finances
Mixing personal and business finances is a HUGE no, no! Even when finances get tight, it is important that you maintain vigilance in the separation of your funds. Dipping into your personal funds to tide you over is ultimately not going to help the cash flow issues in your business, nor is it going to help your lifestyle.
DON'T forget to develop an appropriate risk mitigation strategy
An appropriate risk mitigation strategy will be different for every business so it's important that you take the time to figure out what will work for you. At its most basic level, risk mitigation may be as simple as conducting a credit check before taking on new customers so that you can determine whether or not they have the funds required to pay your bills and also whether they are in the habit of paying their bills on time. Always remember there is no point having a customer that can't or won't pay on time as they will negatively impact your cash flow and drain your resources as you'll be forced to chase them to recover outstanding funds.
BE SURE TO chase payment of invoices promptly
There is absolutely no doubt that late payers are a significant drain on a business. So, it's important that you have processes in place at your end to ensure that invoices are issued promptly and they are followed up immediately after they fall due. Also, if you are faced with a consistently delinquent payer, don't be afraid to withdraw their credit facility. All businesses deserve to be paid in full and on time no matter what size they are.
One last thing, reverting back to the first mistake that SMEs make (they try to do everything themselves) - if you need help don't be afraid to ask. A reputable debt collection agency can help you to chase those outstanding and nuisance accounts.
DON'T rely on a small customer base
This tip is great advice, BUT, for SMEs this can be a tricky one to achieve. That said, you need to try to spread your risk as much as possible and that means taking on a larger number of clients, even if the dollar value of their business is smaller. If you don't spread your risk and you rely on only a few key clients to keep your business running, you may effectively shoot yourself in the foot. What if one of those clients goes under or stops ordering from you? Will your business be able to survive without them?
BE SURE TO act quickly to address problem employees
Dismissing an employee is never easy but not dismissing them can have significant negative implications for your business. Once you have determined that their performance in unsatisfactory and that it cannot be resolved act quickly, delaying the process is not beneficial for anyone involved.
Also, think long and hard before hiring family and friends to work in your business. If this relationship doesn't work in the business environment the result can be disastrous for the business and the friendship.
BE SURE TO conduct thorough market research before you go into business
Do you truly have a great product that the market will want to purchase? This is the question that every budding small business owner needs to ask themselves before they rush out and set up their own company. And when I say this is the question you need to ask yourself, I really mean this is the question you need to spend time researching and developing a thorough understanding of.
Know your market, know your industry, know your competition and know your target audience. And, one last thing, if you discover that your product won't work, go back to the drawing board and start again - there is no point trying to sell a product that no-one wants to buy.
SME owners often start their own business because they are particularly passionate about something. However sometimes this passion can work against you as it creates a focus which is so narrow and single minded that you lose sight of elements around you which could be impacting your business. It is so important that you maintain your passion, but at the same time, have the flexibility and openness to change. For example, if your business plan doesn't seem to be achieving the goals you set out to realise, you need to have the foresight and flexibility to go back and re-visit the plan to determine why it's not working. This flexibility and openness to change could be difference between the success and failure of your business.
DON'T forget the parts of the business that don't interest you
As a small business owner it's very likely that you've started your own business because you are passionate about design, beauty products, fashion or whatever product or service it is that your business provides. That means there will be activities that are critical to maintaining the day to day running of the business that really don't interest you at all. BUT, you still need to ensure that these not so interesting areas are effectively managed. If you focus only on the parts of the business that you enjoy and you neglect the parts you dislike, your business will eventually fall into a serious state of disarray.
There are numerous studies around that suggest it costs roughly five times as much to acquire a new customer as it does to keep an existing customer happy. So, you need to take every piece of customer feedback seriously and you need to ensure that you address them appropriately and in a timely manner.
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