5 common mistakes small businesses make
It doesn't matter if you're the new kid on the block or you're an industry veteran, all small businesses make mistakes from time to time.
Mistakes may be a natural part of the business process. But that doesn't mean small business owners need to personally commit every error in order to learn each lesson.
There are many ways that entrepreneurs can learn from the mistakes of others to avoid paying the price with their own companies. Here are a handful of common mistakes that many small businesses tend to make, as well as suggestions for ways to avoid them.
1. Attempting to Do Everything
A small business owner is a brave soul. They've charted their own course and taken control into their own hands. If you're a small business owner, you're well aware of the confidence that this can create.
However, just because you've succeeded in one area of business doesn't mean that skill or talent will translate to other pursuits. In fact, one of the biggest shortcomings of many small business owners is falling prey to the idea that they can do everything.
The truth is, every business owner has countless things that they're not good at. Often, they're even severely underqualified. For instance, managing taxes or stepping in as a chef are very bad ideas if you're not qualified to do so. Even small activities like managing customer service calls or processing payroll can be a bad idea if you're not trained.
Instead, outsource these activities. Look into technology solutions, such as small business payroll software. If you can swing it, hire employees to address them. The gig economy is another economic way to fill in talent gaps in your workforce without breaking the bank.
2. Failing to Take Finances Seriously
Both overspending and underspending are common issues for small businesses. Often the root of the problem stems from the personality of the business owner.
Those who are bean counters tend to avoid expenses, even when they're necessary for growth — and at times even survival. On the other end of the spectrum, reckless spenders often ignore the math and rack up expenses blindly while hiding behind things like quality or a better customer experience.
Swinging to either extreme can be detrimental to a business. Instead, take steps to gain a firm understanding of your finances. Use software like Quickbooks or Expensify to keep track of income and expenses. Hire an accountant to help you with your taxes. The more you understand your business's finances, the more informed your financial decision-making will be.
3. Mistreating Your Internal Lifelines
As a small business owner, you're likely well aware of all of the threats to your business. From financial concerns to supply chain disruptions, customer satisfaction, and more, there are countless areas that can keep you worrying at all times.
This often creates stress and anxiety that small businesses will pass along to others further down the chain of command. For instance, many small businesses work their employees to the bone. They aren't treated well by management or shown that they're valued.
Suppliers are another group that often get the short end of the stick. They're often left waiting for payments until the last minute, even when they deliver shipments on time.
Make sure to treat your internal and auxiliary workforce with respect. Go out of your way to pay them on time and show them that they're valued. You'll find that your business will run like a well-oiled machine, and you'll get greater loyalty and production.
4. Spreading Your Marketing Thin
Marketing used to be a big company's game. Small businesses had to scrounge around for the local scraps that big-budget corporations left behind.
The advent of online marketing has completely rewritten this narrative. All the way back in 2019, digital ad spending was already poised to overtake traditional spending, with no end to the growth in site.
The only problem is that online marketing, while accessible for small businesses, is overwhelming. Email, social media, website, search engine, content, video, and countless other marketing strategies are available. The worst thing a small business can do is commit marketing dollars to a scattered and mismanaged marketing strategy (or even worse, no strategy at all.)
It doesn't matter if you're spending hundreds or millions of dollars. Always create a solid marketing plan that dictates how to spend each penny.
5. Not Managing Risk
Risk is another common issue for small businesses. With less margin for error than larger enterprises, many smaller companies either play it safe and miss opportunities or take uncalculated risks that end in disaster.
It's important to develop a risk management philosophy for your business. As you do so, make sure you have a balanced approach to risk. For example, don't put all of your eggs in one basket. Use resources that you can afford to lose if a new business idea goes south.
At the same time, don't sit tight on what's working at the moment and let opportunities pass you by. It's easy to put yourself out of business if you fail to evolve along with your industry these days. Look for things like cutting-edge tech or changing customer expectations and then create strategies that incorporate them.
The best way to do this is to set SMART goals. These are goals that are specific, measurable, achievable, relevant, and time-bound. By setting SMART goals, you can create reasonable objectives to work toward. This will keep you moving forward and taking risks. At the same time, it will avoid the need to threaten the existence of your entire business in the process.
There are many challenges that every small business will face. Some of these will be overcome without an issue. Others may stand out as clear mistakes and important learning opportunities.
However, there are also many mistakes that companies can learn from without first-hand experience. From proper finances to a loyal workforce, happy suppliers, meaningful marketing, and much more, it's always worth taking the time to do your homework and safeguard your business against common — yet avoidable — mistakes as you go along.
Want more ideas to help manage your business? Connect with a First Midwest Small Business Banker today
This article was written by Larry Alton from Small Business Trends and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to firstname.lastname@example.org.