Last Monday, I began my two-part series on common mistakes business owners make, starting with the biggest one — not looking at the big picture, which subsequently feeds other mistakes. Business owners have to look at their business at both a macro and micro level. Because we initially take on multiple roles in the beginning, we get caught up in the nuts and bolts of running a business. This leads to some common, but critical mistakes that left unchecked can turn your dream of being a small business owner into a nightmare. We already took a closer look at the dangers of reactive versus proactive, a lack of a clear mission and business stagnation. Today, I’ll conclude by looking at the last two areas that often get overlooked.
Before we dive in, it is important to remember that making mistakes isn’t unusual or uncommon — it’s part of our learning — so don’t waste your valuable time and energy beating yourself up for making past mistakes. Instead, be mindful of these mistakes, so you can recognize the signs and course correct when needed.
The Final 2 Dangers of Overlooking the Big Picture
A small business owner often carries the dual role of being both the leader and chief employee of their business, at least initially. Make sure you are spending adequate time in the leader role, charting the course of the business and looking at the big picture. If you don’t, you may make these mistakes:
4. Not Investing in the Business
A business needs to be profitable in order to keep the doors open whether they are real or virtual. This is a delicate dance of knowing when to invest and when to save. Every business has different needs and business goals, but keep in mind that most businesses will eventually stagnate without some investment to help stimulate growth. Areas you will want to consider investing in, as appropriate:
Enhance or Refresh Your Storefront
Again, this may be an actual brick and mortar building and/or a website but maintaining a very dated storefront can turn-off prospective clients. We may have been told to not judge a book by its cover but almost all of us do it. Over time we stop paying attention to our surroundings, so take a look at your business appearance with fresh eyes and from a client perspective. What are your first thoughts? Does is appropriately convey what you do? Attract your ideal client? You may want to survey clients and ask friends for their honest opinion. Sometimes a thorough cleaning and de-cluttering can make a world of difference.
Update Technology and Software
This can be spendy because technology is always changing and being updated, which is why many businesses often delay doing it until absolutely necessary. I get it. However, if your business stores private information, such as social security numbers, credit card numbers and so on, then make sure you are doing everything possible to keep that information safe. While big corporations and the government are the typical targets of a data breach, they are also likely better able to weather an attack and the aftermath. A small business may not be so fortunate.
Continue Your Education
Very few business can stay frozen in time. Most need to evolve as technology and client’s expectations/needs continue to advance and change over time. We cannot let our skill sets stagnate either. This may mean taking some courses to learn new skills or about new products. Or joining a networking or mastermind group to stay on top of business trends. Or hiring a business coach to help you grow your business. I have done all these and they all have made a difference. Do not be afraid to invest in yourself.
5. Not Prepared for the Unexpected
Your business represents a significant investment of money, intellectual capital, time and energy. It’s not something you built to cast aside or discard. Yet many don’t prepare for the unexpected, which put your business, and likely your family’s financial well-being, at risk. Are you and your business prepared for life’s curveballs?
Create a Business Contingency Plan
In the perfect world, everything would be smooth sailing but there are going to be some choppy waters along the way. Your contingency plan is your lifesaver for those unexpected swells that could flatten your business.
- What Risks Does Your Business Face? Do a risk assessment, considering everything from natural disasters to data breaches to losing key employees to your premature death and more.
- What Resources Do You Need? If any of the above risks become reality, what resources do you need to operate? Outline what they are, how to quickly obtain the resources you need and who is responsible for what. Review and regularly update the list. Make sure employees are familiar with plans that involve them, such as if a natural disaster occurs.
- Properly Insure Your Business Against Risks The types of insurance you need will depend on your business and whether you have employees. Having appropriate insurance can mean the difference between staying in business or closing the doors when trouble arises.
Setting Up a Buy/Sell Agreement
If your business has multiple partners (other than a spouse), you want to have a buy/sell agreement in place. You might want to think of it as a business pre-nup, between partners where you hammer out the details while everyone and everything is still good. It can make things much easier if things turn sour or a partner dies unexpectedly. For example, if one of the partners dies without a buy/sell agreement in place, the partner’s shares may go to his/her estate, which can lengthen and complicate the purchasing process.
A buy/sell agreement should include, but is not limited to:
- When owners can transfer their ownership of a company and to whom.
- Outline the method for valuing the business interests.
- The procedure that will be used in the case of a buyout of one owner for any circumstance.
Even if you don’t have business partners, you still want to consider what will happen to your business if you should die prematurely. This may mean having adequate life insurance coverage to cover business liabilities in addition to whatever personal coverage you would have normally intended for your family. You may want to seek out another business owner and set-up an arrangement to purchase one another’s business if one of you should die prematurely.
Safety Tip: There are lots of considerations and moving parts to structuring buy/sell agreements. I encourage you to work with your business attorney, financial advisor and accountant to help you set these safety precautions up appropriately.
Form a Succession Plan
Many small businesses are family run and want to remain that way. However, just like a buy/sell agreement between business partners can simplify things, so can a proper succession plan, especially since you will likely be dealing with your children and don’t want to cause friction between siblings. The passing of the torch to a second generation can be tricky, with only a third of family businesses successfully making the transition. Whom you choose as a successor is key, so make the decision carefully. Don’t leave it to chance and have a solid plan in place to make the transition go smoothly.
How are you investing in your business? What steps have you taken to prepare your business for the unexpected?