Common Small Business Mistakes that Can Cost You Big

Common Small Business Mistakes that Can Cost You Big

Starting and running a small business is tough work. There are so many decisions to make and things to keep track of. It’s easy to get overwhelmed or make mistakes. While some mistakes won’t make that big of an impact, others can seriously hurt your business. I’ve made plenty in my time as a small business owner! In this article, I want to go over some of the most common small business mistakes that can end up costing you big if you’re not careful.

Not Having a Business Plan

One of the biggest mistakes I see people make is jumping into starting a business without putting together a solid business plan first. I know, I know–business plans can seem boring and tedious to put together. But having a clear roadmap for your business laid out in a plan is so important. Your business plan helps you think through key things like:

• Your business goals and objectives
• Your target market and ideal customers
• Your products and services
• How you’ll market and sell to customers
• Your operations and staffing needs
• Your startup and ongoing costs
• How you’ll finance the business

Without evaluating all of these key elements, it’s easy to end up heading down the wrong path. Then you waste time and money figuring out you need to pivot. Ouch! Take the time up front to do your research and create a solid business plan. It will save you big headaches (and expenses) down the road.

Not Separating Personal and Business Finances

When you first launch your business, it can be tempting to just use your personal bank account and credit cards. But this is a mistake I see bite many new entrepreneurs. Not properly separating your personal and business finances from the start can create big issues down the road.

First, it makes your bookkeeping and taxes way more complicated. The IRS wants business expenses, income, assets, and debts kept separate from your personal finances. Comingling money makes it hard to track things properly.

It also exposes your personal assets to business liabilities. If your business gets sued or has debts it can’t pay, your personal assets could be at risk if you don’t have proper business entities and insurance set up.

Take the time to set up a separate business checking account, credit card, and accounting system right when you start. It’s a bit of work up front but well worth it.

Not Budgeting and Tracking Cash Flow

Many new business owners don’t put together a budget or track their cash flow closely enough. They just wing it and hope sales come in to cover expenses. This is an incredibly risky approach that can put you out of business fast.

Put together a monthly budget that lists out all your expected business expenses–things like rent, payroll, inventory, supplies, marketing, etc. Then look at your sales forecasts and make sure you have enough coming in each month to cover those expenses with some cushion.

Track your daily and weekly cash flow closely too. Watch out for any big shortfalls between expenses and sales that could quickly drain your bank account. Having good visibility into your cash flow situation lets you make smart decisions to improve it.

Not Having the Right Business Insurance

Business insurance is one of those things that seems confusing and complicated. Many new entrepreneurs aren’t sure exactly what policies they need or avoid getting coverage to save money. Going without the proper insurance is extremely risky though.

At minimum, make sure you have general liability insurance in case customers get injured or property gets damaged. Also get professional liability or errors and omissions insurance if your business provides any kind of consulting, creative, or professional services.

Review other types of business insurance too like BOP (business owner’s policy), commercial auto, workers’ comp, cyber liability, and commercial property depending on your needs. A good insurance agent can explain what’s right for your particular business.

Paying for adequate insurance gives you crucial protection against major lawsuits or losses that could sink your business. Don’t cut corners here.

Not Investing in Marketing

One of the most common mistakes I see with new entrepreneurs is failing to invest enough time, money, and effort into marketing their business. Many seem to think “if I build it, they will come” and customers will just magically appear.

Let me tell you–that’s never the case! You always have to invest consistently in getting the word out about your business and bringing in new sales. Especially in the beginning, you may need to devote 30-50% of your time and budget to marketing activities like:

• Building your website
• Creating content and blogging
• Doing SEO for your site
• Running Google/Facebook ads
• Building an email list
• Doing outreach and networking
• Running promotions and sales

Make sure to build out a full marketing plan for attracting your ideal customers. This upfront work to bring in customers will determine whether your business thrives or dies.

Not Investing in the Right Tools

Another mistake I see a lot is new business owners trying to run everything using spreadsheets, paper records, and cheap or free software tools. As your business grows, relying on makeshift systems like this will really hold you back.

Invest in solid tools and software designed for your type of business. For example, use software like QuickBooks for accounting, inventory and order management systems for ecommerce businesses, CRM for sales and marketing, project management for agencies–you get the idea.

The right tools will organize all your business information in one place, provide helpful analytics and reporting, and let you scale your systems as you grow. They are 100% worth the investment for the time and headaches they’ll save you.

Not Hiring Help When Needed

When you first start out, it’s normal to try to do everything yourself to save money. But many business owners take this too far and refuse to hire any help even as their business grows. This can really hurt you down the line.

Know when it makes sense to bring on some help. Hire a bookkeeper or accountant to handle finances. Bring on a virtual assistant to help with administrative tasks. Work with agencies or freelancers for things like IT, marketing, or graphic design.

You can’t be an expert in everything in your business. Paying for help where you’re weak or simply don’t have the time will improve your quality of work and let you focus on your true strengths.

Not Knowing Your Target Audience

One of the most fundamental mistakes I see businesses make is not taking the time to truly understand who their target audience and ideal customers are. They end up marketing to and trying to sell to “everyone.” This shotgun approach rarely works.

Get very clear on who has the biggest need for your products or services. Create detailed buyer personas. Figure out where these ideal customers hang out, both online and offline. Understand their pain points and desires.

Really dig in on the research here. Then you can craft tailored messaging that resonates with your ideal audience and draws them in. This focused approach is so much more effective.

Spreading Yourself Too Thin

Some business owners get over-excited and try to offer too many products or services right out of the gate. Or they serve too many different types of customers. This lack of focus can spread your efforts and resources too thin.

Resist expanding too fast or getting distracted by shiny new ideas. Pick a narrow focus area to start and do that really well. As you gain traction, then you can consider expanding your offerings.

Trying to do too much all at once will just exhaust you, confuse customers, and keep you from truly mastering one area. Find your niche and own it.

Not Having Contracts in Place

In the rush of getting a business off the ground, it’s easy to overlook having proper contracts and agreements in place–both with customers and vendors. But verbal agreements and handshakes can come back to bite you.

Always use contracts and scope of work documents for client projects, services agreements, vendor relationships, partnerships, contractors, staff, and more. This protects both you and the other party by spelling out details, terms, and responsibilities clearly.

Taking the time to put contracts in place upfront prevents misunderstandings and disputes later on. It also gives you something to reference if a conflict does arise.

Not Staying Organized

When you start and run a business, you have to keep track of a ton of moving parts–from financial records, to inventory, to projects, to customer info, and more. Letting your systems and data get disorganized can seriously hinder your success.

Make organization a priority from day one. Set up processes and use tools to keep everything in its place. For example, organize your customer data in a CRM, keep inventory records using accounting software, and track projects in a project management system.

Staying on top of organization may not seem exciting, but it makes a massive difference in how smoothly your business operates. Don’t let those details slip through the cracks.

Well, there you have it–10 of the most common and costly mistakes I see small business owners make. I’ve made many of these errors myself over the years! Don’t beat yourself up too badly if you realize you’re making some of these mistakes in your own business. The important thing is to learn from them and course correct. Wishing you major success!