Joe’s Top 5 Small Business Mistakes

By: Russ | Published: September 9, 2009 | Filed under: About small businesses, Small business mistakes, Sunshine Suites

Small Business Mistakes by Sunshine Suites Managing Partner Joe RabyAt Sunshine Suites we’re in the business of small businesses. Over the past eight years we’ve had hundreds if not thousands of startup companies come through our doors. Having met so many first-time entrepreneurs, and as a small business owner myself, I’ve observed almost identical mistakes made by all of them. Falling into one or two of these traps doesn’t automatically mean your business is doomed, but make enough of them and your business might become a statistic.Joe’s Top 5 Mistakes Small Business Owners Make1. Not keeping accurate books. Without this information, business owners can’t tell what their biggest expense is, how much money they made last month, if sales are growing, if their marketing is working, etc. It is absolutely crucial. If you can’t do the books yourself, hire a good bookkeeper to come in biweekly and make sure your books are up-to-date and that you know how to look at a basic financial statement.2. Not marketing your business, or using the same marketing techniques over and over. Marketing is the lifeline of a small business. Without marketing, your business will grow much slower than it has the potential to, if it survives at all. The key to marketing is to continually test several different ideas, then use the best results, and then continue testing. But while doing this is important, it is even more important to quantitatively look at the average value of a new sale, and to make sure your marketing is bringing in more business than it costs. For example, let’s say you run a hair salon. Through good surveys and record-keeping, you know that the average customer will stay for 18 months and gets a haircut every month and a half. You charge $100 per haircut, and give an average of twelve per customer, which means that your average customer is worth $1,200 (not including referrals, which we’ll consider a bonus). Therefore, you should make sure you’re never spending more than that (or even some percentage of that amount, like 25%) on a new customer.3. Trying to do everything yourself. This is a common mistake, and is not necessarily the worst thing in the world, at first. It’s great to get your feet wet in Quickbooks,to clean the bathrooms, to work with advertising companies, etc. There comes a point, though, as the business owner, where you can’t do everything effectively. If you are doing everything, you are not using your time well. Other people can do various tasks much more effectively than you – find those people and hire them. That leaves you time to do the jobs you are good at and what you enjoy.4. Going at it alone. A lot of people start businesses on their couch and their laptop, and end up spending a tremendous amount of time by themselves or with one or two business partners. While I’m all for saving money, particularly as a startup, generally if you surround yourself with other business owners and entrepreneurs you’ll get ideas and new business out of it that vastly offset any costs. For example, a lot of people will pay $500 to go to a conference for a weekend to network, while you can put yourself in an office environment like Sunshine’s for $275/month and network every single day, making very valuable relationships. There are a lot of free or really inexpensive options, such as meetup groups (meetup.com) or networking groups like BNI (bni.com) that are really inexpensive but can be tremendously helpful. The last thing you want is to be working from home all day, with barely a reason to put your pants on in the morning. Hook up with some connectors and let them show you the ropes. Entering into a small circle (like the one at the office) is guaranteed to beget larger ones so long as you make yourself available and keep an open mind.5. Overextending yourself (with credit). While credit is the lifeline of a small business or startup, its tempting to continue to grow using credit. While this may be an effective strategy at first, it really adds an exponential amount of risk to the success and survival of your company-one that you won’t notice until times get tough…and then it’s too late. As Warren Buffett once said, “Only when the tide goes out do you discover who’s been swimming naked.” Splurging on top-of-the-line equipment or an executive office with a view is really tempting when you’ve got money to burn, but just remember eventually you’ll have to pay that money back. You’ll want more to show for it than just some nice toys.