Running a small business differs from many other professions in that you can get started without any special training, and there’s no one to train you in how to lead the team you build. Yet it is management mistakes that destroy many businesses in their first year. That’s why you don’t want to make a mistake in setting up or managing your small business. Here are 6 things small businesses get wrong about management.
Assuming That Financial Management Isn’t Important
Too many small businesses focus on sales or the manufacturing of their product while neglecting their bookkeeping. They may track sales and issue paychecks but not look at the bigger financial picture except when they need to fill out a corporate tax return.
This hurts your business in several ways. First, you don’t know when the business is in trouble until it hits. Second, the amount of work required to complete the books is greater when you do it irregularly, causing many to delay doing it. Then they’re operating without a financial roadmap. You can’t budget for expenses or analyze why you’re overspending. One solution is prioritizing bookkeeping and logging income and expenses daily. The other is to hire a bookkeeper that keeps up the books and gives you financial reports regularly.
Failing to Have a Plan
Don’t start your business without a business plan. Know what you’re going to offer, who your intended customers are, and how you’ll deliver your product or service. Have at least a basic marketing plan, though this will need to evolve as you get feedback from the market.
Know how you’ll structure the business from the very beginning. One of the most popular structures for small businesses is an LLC. But what is an LLC?
An LLC, or Limited Liability Company, is a legal structure that protects you against lawsuits, prevents double taxation of the corporation, and offers a host of other benefits. If you want to learn more about them, you can check out this guide to understand what differentiates LLCs from other business entities. You’ll learn the benefits of forming one in detail, as well as how to form one. They also give you some pointers on the best states for forming LLCs in the country.
Refusing to Delegate
If you originally did everything in the business, it is understandable that you’re reluctant to delegate. Yet that was typically the point of hiring help. Refusing to delegate work to staff or failing to ask them for help will leave you overburdened. Let others take care of a lot of the day to day work while you focus on the overall strategy for the business. If you don’t quite trust people, let them practice handling small tasks before you increase their responsibility. Outsource tasks from cleaning to IT to professional services to ensure that it meets your quality standards. And get rid of individuals you don’t trust so that you can put your faith in those who remain.
Refusing to Listen
Many managers think management is talking to people. In reality, it involves at least an equal amount of listening. Don’t discourage or ignore employee feedback. They are on the front lines of your business, and they often have the best ideas for making things better. Give them the resources they need to succeed, and don’t be afraid of them doing better than you in one area or another. For example, listen to your marketing director’s advice for promoting the business while you handle the technical side. Their success contributes to the success of the operation.
Not Prioritizing Profits
The basic measure of a business’s success is its profit margin. On the other hand, the business cannot remain in business if you aren’t earning a profit. You can’t afford to hire people as a form of charity if they don’t contribute to the bottom line. Nor can you maximize service at the expense of paying your team members. You need to run the numbers to determine which products and services are profitable and drop those that aren’t. And stop controlling everything, trying to micromanage people and service delivery in the vain hope of making it perfect. Accept that not everything will go according to plan, but have plans in place on how to perform the core functions of the business.
That doesn’t mean that you should forget the human aspect of your business and neglect your employees. As a matter of fact, employee wellness could play a part in productivity and turnover, which can both affect your profit. So, make sure that you put importance on the wellness of your employees too, but make sure that it is actually beneficial to your bottom line as well.
Being Too Rigid
The current workforce is becoming more and more fluid, and you have to be able to adapt to change. While you may be stuck in your ways and have a certain way of doing things, you have to be open to other possibilities as well.
The demographics of the workplace are slowly shifting in favor of the employee as many of the baby boomers are now leaving the workforce. This means that you’ll need to stay abreast of the most recent changes and consider introducing them in your business.
This could mean offering flexible shifts, using an agile management platform and approach, or allowing for a BYOD policy. The worker of tomorrow will most likely be more mobile, and you have to at least consider the option for distance work if your business allows for it.
You will be rewarded with a more engaged workforce, and could end up improving performance as well. It could also end up making recruiting much easier. That also means, however, that you need to hire managers that will be well versed with new tools and are familiar with the challenges and realities of an agile workplace.
Management mistakes in big business may make the headlines, but management mistakes in small business can be disastrous. Understand the biggest mistakes you can make so that you don’t make them yourself.