Owners of small and medium businesses never expect to fail, but every year, thousands of companies close shop, anyway. Reasons for failure vary from cash flow problems to poor product-market fit, but in many cases, company leaders could have avoided the worst if they’d known what to expect. These are common mistakes that small business owners make.
Keep an eye out for these common mistakes so you can prevent them:
1. Failure to Delegate
When you start a business, you must learn your limitations quickly. New research from payroll solutions provider OnPay found that payroll and HR tasks take up nearly 40 hours of work per month, yet more than 40% of small business owners continue to handle that administrative work alone.
As the leader of your company, every minute of your time is valuable. You can’t waste hours on administrative tasks that someone else could handle just as well. When you have more than a couple employees, follow a simple rule: If someone else can do it, someone else should. That way, you can spend your time dealing with tasks that require your unique expertise and authority.
2. Technology Avoidance
Just because you’ve made it this far without 21st-century tools doesn’t mean you’ll make it much further without them. Communicating with customers might work by phone, for instance, when you’re fielding 15 calls per day. Can you handle 50? What about 150?
If you’re shaking your head, think about business messaging services. For family support startup Cleo, Intercom’s Answer Bot tackled a fifth of all inbound customer conversations. Although you’ll never be able to automate all of your customer service needs, you can certainly make a dent. And that dent may be the difference between paying for a full-time or part-time customer serviceperson.
3. Limited Investment Options
Startups in Silicon Valley pursue funds from venture capitalist firms. Small businesses in suburban areas often turn to bank loans. Some founders dip into their own savings or borrow money from friends. In many cases, business owners use a combination of funding sources to get the capital they need.
Don’t fall prey to the misconception that your funding must come from a single source. Create a financial plan, figure out how much money you need to reach your goals, and consider a variety of funding options. You may discover that alternative funding sources like crowdfunding make more sense for your company than traditional finance channels.
4. Undervalued Products and Services
You want to make sales, but you shouldn’t undersell the value of your product or service to boost numbers. Founders who follow the “buyers now, profits later” philosophy often struggle to raise their prices to fair levels after gaining a discounted foothold. Take the time to evaluate your product and market, then set a price that makes sense for both you and your customers.
Cost-plus pricing models (which involve calculating the cost to produce and adding a markup) make sense in some circumstances, but not all. For example, you might be able to sell a smartphone accessory for $30 with a 15% margin. However, if comparable products on the market command prices of $50 or more, don’t sell yourself short.
5. Marketing Neglect
When you finally land a few customers, it’s easy to fall prey to the illusion that your momentum will carry itself forward. Unless you actively invest in your marketing strategy, though, your sales pipeline will eventually dry up. Not even word-of-mouth marketing can save you if your early adopters don’t feel the need to tell others about their experiences.
Invest early and often in marketing to keep your growth going strong. Inspire existing customers to spread the gospel by asking for referrals and offering valuable incentives. Connect with your fans on social media. Develop content that entertains or educates. Build your brand’s reputation to keep business rolling.
No matter how much you love your company, you can’t sacrifice yourself at the altar of business success. Your mind needs time to recharge, and sleeping under your desk during your 15-minute lunch break doesn’t count. If you can’t step away from your business for five minutes, you don’t have a problem with hustle — you have a problem with processes.
Build your business in a way that doesn’t require your constant presence. Give your employees the authority to make decisions on the spot. When you feel confident in your company’s ability to run independently, carve out some time every day to get away from the grind and reflect. Take a short vacation without checking your email, even if it’s just for one day.
Small- and medium-sized businesses can create sustainable wealth and enjoyable lifestyles for their owners, but company founders must avoid the dangerous pitfalls of leadership to enjoy the fruits of their labor. If you find yourself committing any of these deadly business sins, take a step back to think about how you can change course. A minor adjustment today could save you from major frustration down the road.