Top 6 Small Business Financial Mistakes

The 6 most frequent mistakes that we see small business operators make are:

  1. Trying to do everything.

    You cannot - nor should you even try - to do the bookwork, develop new products, create marketing plans, manage every staff member, deliver products, etc etc.

    As a small business owner pick what you are good at and then do that. Go out and source people with the skills you need to perform the tasks that you are not good at - or dislike. It may be and added cost but the benefit is that it will free you to do what you set out in the first place to do.

  2. They have no business plan - or one that sits in the bottom drawer of the desk.

    Go and Google "Business failure" and you will get all the statistics you need to see the number of businesses that fail every day and the common denominator is that they have not planned.

    Planning is the key to success - you simply cannot deal with issues in business unless you have pre-thought through your ideas and have an action plan of how you are going to implement them.

    A skilled professional can help you get a plan together very quickly and it is money well spent.

  3. Not seeking advice and not seeking the right advice.

    The advisors that you choose for your business should be the best that you can afford. That does not mean you should only refer to the top level consulting houses - it means that the person that you select to work through your issues should be money that you "invest" in your business and there should be a payback - therefore their cost is not relevant.

    Have a clearly set of defined goals that you want to attain and sit down with them to see whether they can give you the right insight. Then engage with them and deal with your issues immediately.

  4. The Abuse of Staff.

    Now this is not a case of anything immoral. This is about making sure that you respect your employees and that you do not expect to much of them. People want 3 things from a job:

    • Fair pay.
    • To be respected and treated with dignity.
    • To feel that they have contributed to success.

    I have been involved in many different employee surveys and it is amazing how few people rate financial rewards in their top 10 sought after benefits. People want to be satisfied that they are doing a good job. It is amazing how far a thank you goes - or an apology when you have been a right ass!

    Too many small business owners thrust more and more onto a key staff member and force them to leave. The person gets burnt out and resentful of the level of work that they are doing. Always allow your employees to express their opinions and give you feedback about how you are doing. Whilst this can be very confronting you will be amazed at how easily you start to deal with issues before they even arise.

  5. Spend before they should.

    This goes hand in hand with a lack of capital forcing many businesses to close. We all have an image in our mind of how we want our business to appear to the outside world. The problem is many people take a big leap and incur a substantial amount of fixed cost before they can afford it.

    Take it slowly and ask yourself "Can I do this in another form that will suffice for the time being?"

    If you can then go that way - if not then incur the cost. Either way you have done some panning and at least thought things through properly.

    Remember Apple computers started in a garage! Do you really need that palatial office in the CBD?

  6. Being Afraid to Charge.

    I see it all the time - a small business owner gets a referral from a friend or a relative and they get beaten down on price. Don't do it.

    If a person needs the service or product then they should be prepared to pay for it. I personally will try to give my business to people that I know - not for a better price - but because if I am going to spend the money then I may as well spend it with someone that I know.

    Take pride in your product offering and don't discount. Make your clients respect that you have a business to run and that the price quoted is the price required to maintain the service levels. Yes you will lose some customers every now and then - but are they really the clients that you want anyway.

Published on March 3-st, 2008 in Financial Planning
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.