These common mistakes can cost you time and money. Here’s how to avoid them.
- Writing a business plan is one thing, but you also need to lay the groundwork before starting your business.
- Your team is the backbone of your business, so take care of it.
- Recklessly cutting costs gives you more time to build a profitable business.
I started my second small business about seven years ago and it’s fair to say I learned a lot of things the hard way. I run a small local newspaper, but many of my experiences will resonate with small business owners in any industry.
Hopefully these lessons will help you avoid making the same costly mistakes I did.
1. Lay a strong foundation
I spent a lot of time creating a business plan and making projections. But I didn’t do enough groundwork and the first year of the business was correspondingly tougher. We got the paper out in a hurry because we got an exclusive interview. On the plus side, it pushed us over the starting line. At the same time it meant that we had to catch up a long time.
Here are some of the things you can do before opening:
The reality of starting a business is often far removed from what you read in business books. You’ll never feel quite ready to take off, and you don’t want to spend so much time planning that you never do anything. However, once you start, not only will you barely have a spare second, you may end up paying staff and rent. Simply put, your monthly expenses will skyrocket.
2. Take the time to find the right people
My hiring mistakes have cost me a lot of money and time. One of the consequences of starting too quickly was that I then hired out of desperation, a common mistake. I hired someone to fill a short-term need without creating a clear job description or being sure the person accepted our mission and vision. It wasn’t fair to them or the rest of the team.
As a small business owner, I am unable to pay huge salaries and I rely heavily on my ability to create an environment that people want to be a part of and contribute to. A negative person who doesn’t contribute can have an outsized impact on a small team. For example, people wonder why they should work hard when one of their colleagues isn’t contributing. You can spend a lot of time trying to fix the problem with extra training, but there’s only so much you can do if their expectations don’t match yours. And firing people is also costly and time-consuming.
3. Become an expense management ninja
Depending on how your business is funded, you have a limited amount of time to breakeven and start making a profit. The larger the window you can create, the better your chances of success. This means being ruthless in your cost-cutting efforts and always keeping your goals in mind. Make sure you review your expenses every month and diligently chase down late payments.
There are all kinds of tactics you can employ to cut costs, and no single solution will be right for everyone. For example, you can save time and money on transportation by pushing for more video calls instead of face-to-face meetings. But if those relationships are fundamental to your success, that may not help. For certain products, switching to cheaper suppliers can make sense. But if you compromise the quality of your product, you could lose customers.
Another place you might be able to cut costs is with subscriptions. I’m certainly guilty if I think, “It’s only X dollars” and sign up for services I don’t really need. Those X dollars can add up quickly. Try to evaluate new services in terms of cost versus time saved. Investing in payroll software can be worth it if you spend a lot of time managing your employees’ paychecks. But not if it only takes you an hour.
The only area where I personally relax my spending is with my team. I don’t mind paying for training, buying people coffee, or taking the team out to lunch occasionally. As with anything, it’s all about balance, but employee retention is extremely important. If it costs a little more to keep people happy, I think it’s worth the investment.
4. Don’t waste time on things that don’t really matter
Focus is key. It is very easy to try everything and everyone will have hundreds of good ideas and suggestions. The problem is that you only have a limited amount of time and it’s easy to get overwhelmed. Or worse, badmouthing things and damaging your reputation. We’ve learned that it’s better to do one or two things well, especially in the beginning.
To give you an example, our print newspaper desperately needed a website, so we built one. But contrary to popular logic, we didn’t have to make videos or build our social media presence — at least not initially. Sure, video and social media are becoming increasingly important. However, they didn’t generate any revenue for us and we couldn’t produce them at the same level as the print edition. In fact, it would have hurt our brand to invest time and money in additional channels that we couldn’t maintain or run well.
Running a business isn’t easy, and you’re sure to make your own mistakes along the way. One of the biggest lessons I’ve learned is that things will go wrong. How you deal with problems that arise is crucial, because this is the only way to ensure the success of your company.
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