5 Mistakes Small Businesses Make

Many small businesses are started based on a good idea and a lot of enthusiasm. While both are necessary for success, they are not enough on their own. Any entrepreneur should expect to make mistakes when starting a small business, but some mistakes are more serious than others. Based on my experience as a small business owner, making these 5 mistakes can undermine your small business success.

Not adequately capitalizing the business. Give your business a fighting chance from the start by ensuring that it is adequately capitalized. Do some serious number crunching to determine how much cash you will need to get the business off the ground and to keep it afloat for at least the first year. Add a generous amount to that figure on the assumption that it is likely to be too low, and then line up dependable sources of cash adequate to fund those requirements. Being sure that your business is adequately funded for an extended period of time will allow you to focus your attention on building and running the business during that first critical year of its life.

Not focusing enough on sales and marketing. You may have a product or service that, in your view, is so special and unique that it will sell itself. In reality, you are going to need to be proactive in getting the word out. You may not see yourself as a marketing or sales expert, but you will need to become one or to hire one to help you out.

Keeping the wrong customers and overlooking the right ones. Many small businesses generate the majority of their revenue from a few customers. As you seek to expand your customer list, don't overlook these loyal customers. Remember, they are the ones paying the bills and, as a result, they should be given the white-glove service that they deserve and always treated like the invaluable asset that they are. At the other end of the spectrum are the problem customers-the ones that don't pay on time, that are overly demanding, and that require a disproportionate amount of your time in relation to the revenue they generate. While it is difficult to turn away any customer, firing a customer who is costing you money only makes sense, so be prepared to do it if necessary.

Not making bill collection a priority. Your vendors expect you to pay your bills on time and you should expect the same from your customers. Clearly communicate payment terms up front with each customer, get invoices out on time, and be disciplined and proactive about contacting customers within a set period of time if payment is not received. Also, although the path of least resistance is to use email to ask for payment, a friendly, but direct personal call often is far more effective.

Not controlling expenses. Overhead is far easier to take on than to eliminate, so be cautious about adding expenses to your business until you are confident you can cover them month in and month out. At least initially, keep as much of your expense structure variable so that you can more easily adjust costs if your revenues fluctuate.

One way or another, all of these small business mistakes relate to not focusing enough on cash, from having adequate capital when starting your business, to taking the right steps to be sure that the business is generating the cash flow needed to grow, to using cash most productively. Cash is the lifeblood of any business and, as a result, paying close attention to cash flow can make the difference between success and failure.

Sources:

Barry Moltz, www.openforum.com, Groundhog Day: 10 Mistakes that Small Businesses Make Over and Over

Brittany Umar, www.thestreet.com, The Top Five Mistakes Small Businesses Make - TheStreet

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