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Even the smartest small business owner
can do dumb things now and then. Unfortunately, some mistakes can
kill a company.
Just ask Jeff Seifried, small business coordinator for the City of
Aurora, Colo., and Peter Tourtellot, chairman of the Turnaround
Management Association.
They, along with other experts who prefer to keep their
observations anonymous, have seen the best - and worst - of
small-business operations.
Here are 10 examples of common, but potentially deadly, errors
committed by otherwise brilliant small-business owners. Don't make
the same mistakes.
Underestimating the importance of cash flow management
Two woodworkers had a thriving business building interiors for
retail stores. They did beautiful work and their customers were
pleased, but it often took them 60 or even 90 days to pay the bill.
Until the money rolled in, the partners couldn't start on the next
job because they couldn't buy materials. They lost jobs because
customers were in a hurry. You can be making plenty of money, but
if cash isn't arriving in time to meet payroll and buy inventory
when it's needed, you can be quickly out of business.
Getting sloppy with recordkeeping
The owner of a lawn service was haphazard about recordkeeping. If
he had kept better track of lawns mowed, he would have known that
his oldest mowers had so many miles on them, they were unlikely to
last the season without an overhaul. Instead, it came as a very
unpleasant surprise when three of them burned up in one week. Good
records are a key decision-making tool. If you're not keeping good
track of your business, you are denying yourself the tools to make
good business decisions.
Ignoring inventory
The owner of a business-supply store bought a flat of construction
paper just before school started. Three years later, employees were
still stepping around the boxes to get into the storage room. If
you end up with stale inventory, discount it and get it out of
there. Otherwise, you're just tying up money and taking up storage
space.
Neglecting collections
A dentist had dozens of outstanding bills for routine and special
dental work approaching 180 days old because his assistant hated to
make collection calls. Nobody likes to dun people, but unless you
have a systematic collection plan and make sure it's carried out,
some people just won't pay.
Disregarding employee concerns
The owner of a small jewelry manufacturing operation refused to pay
overtime. He thought workers should be able to get the job done in
the time allotted. Employees came and often left unhappy over what
they saw as unfair treatment. Finally, one of them complained to
the state division of wage and hour, which launched an ugly and
(for the jeweler) expensive investigation. If you have a hard time
hiring and retaining good employees, your business is doomed. And
if you find yourself the target of an employment-related lawsuit,
your expenses can be astronomical. Get expert advice on
human-resource issues. While it may look expensive, it can save you
a bundle in the end.
Failing to delegate
A baker thought she was the only one who could make the perfect
cookie. Back trouble that put her in bed two weeks before Christmas
nearly shut down the business. Recognize that you can't do
everything. Turn some of the job over to the best assistant you can
hire and trust him to do the job, even if he makes a mistake now
and then. If you insist on doing it all yourself, you can't
grow.
Offering something the customer doesn't want
A water ice vendor spent all his time and money developing 100
delicious flavors. The trouble was nobody bought anything but
cherry, lemon and vanilla. Ultimately, his inventory melted away
and so did his profits. Market research is vital. Talk to potential
customers, talk to current customers and respond to what they tell
you.
Letting costs get out of control
The owner of an auto body shop was having such a great year, that
he bought a lift that wasn't in his budget. He also hired the son
of a an employee who needed a job, even though there wasn't quite
enough work to keep another person busy. In the final analysis,
revenue went up significantly, but costs skyrocketed. If you're not
careful, you'll spend up all the profits.
Spreading marketing dollars too thin
The owner of a Tex-Mex restaurant in a part of the country that's
not exactly a hotbed of enthusiasm for Southwestern cuisine had an
obvious need to advertise. And she did. She bought one cable TV ad,
one radio spot and a small coupon in the local weekly. Although she
spent plenty - several thousand dollars altogether – her efforts
didn't add up to a marketing campaign. Failure to spend wisely on
an integrated and continuing marketing plan is an expensive
mistake. In this case, her location is now a pizza parlor.
Underfunding an emergency account
When unannounced road resurfacing closed a popular dress shop's
doors for a month, it put the owner out of business because she had
no emergency money and she couldn't go a whole month with virtually
no sales. As every gambler knows, no matter how good a player you
are, you're occasionally going to be dealt a bad hand.
Likewise, every business needs a financial resource to turn to when
disaster strikes. Bad things do happen frequently to good people
and their businesses, so, like a good Boy Scout, you have to be
prepared.
© Copyright 2002 Bankrate, Inc. All rights reserved
Copyright 2002, ROC Systems
Pty Ltd. All rights reserved. Reprinted with permission from
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