Dear Dan: We’ve cut costs, lowered prices and accelerated our marketing. But there still seem to be so many things that can run off track. What are some common small business mistakes we should look out for? — Worried
Dear Worried: From blockbuster bankruptcies to broken banks and blows to business bottom lines, today’s economic news is like a bad dream. The National Federation of Independent Business (NFIB) says the current recession has already been harder on small business profits than any other time in the past 35 years.
Record numbers of small businesses surveyed for the latest NFIB Optimism Index reported a decline in earnings. Most (60 percent) say that’s a result of slower sales, while others blame lower selling prices. About 31 percent of small business owners say they are cutting prices, while only 13 percent have raised them. The cuts in average selling prices by small companies are happening at a record pace.
Conditions remain precarious for millions of business owners. Despite the impression that most businesses buckle under the weight of a single calamity, however, the path to ruin is often paved by a series of small missteps. We become blind to chains of mistakes that ultimately lead to disaster. Here are some moves that can help you avoid the kinds of missteps that by themselves aren’t life threatening, but taken together can sink a struggling business:
1. Lack of information sharing. Keeping employees, partners, vendors and others on your team including your accountant informed of news both good and bad is important to staying on track. Encourage employees to look for trouble “hot spots” and ask for help early to solve problems.
2. Data denial. It’s not enough to merely track metrics and gather financial information about how your business is performing. You have to look at and interpret the information and heed what it’s telling you. Many business failures could have been avoided if the owners had pinpointed the trouble earlier and taken correction action.
3. Blowing off customer complaints.Customer complaints are sometimes hard to take – especially when you face other pressing issues — and may not even be justified. But don’t merely blow them off. They are a valuable early warning system that tells you when something’s amiss. Make sure customer feedback reaches you quickly, and that you take it seriously.
4. Letting conflicts simmer. Conflicts with partners, investors, clients or employees are toxic to a business already in survival mode. If they spiral into litigation, the end may be near. Successful businesses learn early that there are greater profits in peacemaking. Take steps to resolve conflicts early.
5. Outdated financial systems and technology.Business owners faced with declining sales, tight deadlines or dwindling resources sometimes delay updates to financial and IT systems. But putting off key projects can result in lost time, money and productivity. If you’re still doing finances manually, get them into a software program such as QuickBooks. And online billing solutions such as FreshBooks.com can help keep your invoicing in order.
6. Process free-for-all. Even in a very small business, confusion over who’s in charge and what to do when there’s a problem can magnify mistakes. Establish rules and hold people accountable for following them. Being entrepreneurial is great, but people still need to know how you want things done.
7. Discouraging dissent. Everyone should be encouraged to speak up if they believe the business is making a mistake. Help each employee feel responsible for the overall success of the enterprise.
8. Wearing competitive blinders. Failing to stay informed of what your competition is doing can be lethal to your business. Stay abreast of news and developments from similar firms in your industry or area. You’ll avoid being blindsided by major moves. Ask clients and business associates how they feel your business measures up to the competition.
9. Taking good employees for granted. High turnover and the departure of valued employees can accelerate troubles. Rewards and recognition – even small gestures – go a long way to keeping your best people around. Treat new hires with care. Provide a mentor, if possible.
10. Failing to guard against fraud.Thieves in the hen house sink many small firms. While small businesses aren’t required to perform internal audits, many bring in outside financial experts for occasional checks and balances.
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Thanks for the post, especially your points regarding financial and operating data. I’ve found that too many smaller retail owners are too data-averse. There are important stories and messages in the data. It’s easy to get overwhelmed by too much data, but the right data can and does speak volumes.
One real disaster waiting to happen at both small and large businesses that should be mentioned as well is the laying off of sales people, the true life blood of many businesses. These layoffs make the sales slump worse now and then when the economy does turn around, the business is like a flightless bird without them unable to compete.