When you are running a small business, you don’t have the luxury of consulting a whole team of directors, consultants, and advisors. You are probably the only person with enough authority to make commercial decisions, and the pressure to avoid mistakes can be crushing.
While no one can ever go through their career making a mistake (and errors can be incredibly educational if you are an inexperienced business manager), if you can avoid simple issues then it is worth learning about them before it is too late.
Simple mistakes can cost you a great deal of time, energy, resources, and even brand reputation, so you should always seek to research a problem before you implement a solution.
For example, you may be tempted to overstretch your budget if you are looking to reinvest in your small business, but this can quickly lead to problems if your cash flow falls out of balance. Similarly, many business gurus tell small business owners to scale up quickly, but this can also be problematic if it is not done in the right way.
These mistakes should not be taken as a universal truth, because they all depend upon the context of your business and the specific situation you find yourself in. Take each with a pinch of salt and remember to always trust your gut when it comes to making important commercial decisions.
Here are five mistakes to avoid if you are running a small business:
1. Don’t overstretch your budget – cash flow is king
One of the easiest mistakes to make if you run a small business is to overstretch your budget. It is disconcertingly easy to do, because you may want to buy more stock, hire more employees, invest in a new marketing campaign, or invest in another franchise.
Whatever the case, you must balance all spending with your average cash flow. If you don’t leave enough aside for a rainy day, then you may leave your business vulnerable to severe cost cuts or even bankruptcy.
This is not to say that reinvesting in your small business is a bad thing. It can increase your customer base, make your business more profitable in the medium term and help your employees become more productive.
Instead, you should focus on improving your cash flow. A common challenge for small businesses is establishing a consistent customer base. You can have strong months and weak months, making it difficult to ascertain how healthy your enterprise really is.
Learning how to improve your cash flow can transform the health of your business and help you achieve the best of both worlds – investing in your business and keeping your profit margins healthy.
2. Avoid scaling up too quickly
Another potential error to avoid is the temptation to scale up too quickly. When you have reached a comfortable level with your business, your attention will naturally turn to the next step.
However, the success of many small businesses is defined by their size. For example, if you run a family bakery, making it into a franchise can ruin quality control, destroy the atmosphere and alienate your core clientele. As a result, you should analyze what it is that makes your company popular, and double down on those factors rather than chasing what other businesses are doing.
Similarly, many businesses can leave themselves vulnerable when they scale because their profit margins become slim. While it feels like you are more successful when you own three shops instead of one, you might be taking home less money.
This is not to say you should never scale, only that you should avoid doing it too quickly and allowing yourself to lose control of your core commercial structure.
3. Stop trying to please everyone
If you run a small business then attracting new customers can be a challenge, but this does not mean that you should become desperate.
Trying to appease everyone in your marketing and product ranges will just end up watering down your brand image and leave you appealing to no one.
Instead, make a clear niche for your business and double down on it. This will mean that some people will not find your products or message appealing, but it will open the door for others to love your brand and buy from you repeatedly.
Many successful small businesses owe their profitability to a small group of loyal customers who buy their products, recommend their business to others, and act as unofficial marketers of the brand.
After all, you are never going to compete with multinational corporations for the breadth of products or diversity of customer bases, so stick to what makes a small business so special – individualism.
4. Overcomplication can kill momentum
To build upon the previous point, you should make your business model as simple as possible.
Cluttering up your production process, marketing message and daily routine trying to deliver a dizzying range of products and services will just ensure that none are as well-developed as they could be and that your customers are confused by what you sell.
By focusing on particular products, you will be able to remain agile, adapt to changing market demands, and grow faster as a result. It will help you to become the best in your field, perfect your business model and keep your enterprise stable on a month-by-month basis.
5. Don’t take your focus away from the fundamentals
When you are running a small business, it can be tempting to forget about the basics as you chase growth and greater successes.
Your role will encompass more and more tasks – from strategy to recruitment, and business meetings to attracting investors. At this point, you may forget to keep on top of product quality control, customer service, the condition of your commercial real estate, and the abilities of your employees. If these details are neglected for long, they will start to undermine the success of your business. Sometimes it is impossible to attend to these tasks yourself, so delegate the responsibility to a trusted member of your team.
