5 of the Worst Mistakes Made by SMB Ownerson 24 October 2016
SMBs have their own kinds of challenges and can prove highly sensitive to fluctuating market conditions. They can also be dynamic, fast-growing and innovative. Whatever the circumstances, they require great leadership – yet many business owners come close to sinking their own ship.
What are some of the biggest mistakes you can make as an owner of an SMB? What practices should you follow to minimise the risk of failure?
Not keeping up with technology
In today’s age technology improves at lightning speed, and keeping up with the latest trends can be a time-consuming and difficult task. This is especially true if you are an older company such as a family-run SMB.
However, as a business owner, employing the latest software and tools can make all the difference.
Utilising tech, such as Glasscubes’ cloud solutions and collaborative software will result in greater efficiency, better teamwork and improved quality. And all this for a relatively small sum of money, as services can be scaled according to need. Flexibility is one of the requirements for any modern business as with our connected world, business conditions can often change overnight.
Also, there is consumer technology to take into account. Internet of Things (IoT) and mobile accessibility needs to be considered to compete in certain market niches.
Having the possibility of products sending back data to the manufacturer, while not widely adopted as of yet, will enable innovations that have the potential to change the way we live. The fridge that automatically orders food that is running out, the dryer that tells the thermostat to lower the temperature to save energy, or the car that constantly communicates with its surroundings to avoid collisions or traffic jams.
Failing to optimise both products and services for mobile phone access can be very harmful. For example, an ecommerce site that visitors can’t fully utilise from their iPhone could lose your business and create a negative experience for a potential customer.
Businesses that don’t take these things into account will quickly find themselves left in the dust by competitors.
Starting in the deep end of the pool
While most entrepreneurs are highly knowledgeable in their field of work, this does not equate to them running a successful business – business experience trumps subject expertise.
Taking on too much without being prepared for the consequences, investing heavily in staff and equipment without having the right sales team to back it all up, or simply having an unsustainable idea will cause many companies problems before they even get started.
Doing business may not be rocket science, but the nuances of the craft can be hard to pick up without help. It may be worthwhile hiring a consultant to help manage key moments in the business, such as a shift in scale or offering. The “do it yourself” mentality can be quite strong in SMB owners, but getting the right support and insight can give you the essential tools needed for success.
Not managing soft resources
Failing to properly manage soft resources, such as staff, is one of the biggest reason SMBs don’t make it through their first 4 years.
The staff normally represents one of the largest parts of the budget for an SMB. There are so many parts of a fledgling company that it’s hard to hire people with enough knowledge to cover them all. This leaves many companies without any real in-depth knowledge of certain aspects of the business, and that can make work inefficient.
Millions of words have been written about leadership and management, but it all comes down to this: Take care of your employees and they will do the same for you. Realise that the company is not all about you, and that your staff are an integral part of your success.
Taking on more staff can also be a decision made too lightly or hastily. If staff are needed in short bursts, such as if a big contract comes in, consider hiring temp workers to cover the extra hours. This will help with building loyalty and motivation, as laying off full-time staff is harmful to morale. Also, you always have the option of offering a full-time position to temp workers at a later stage.
Not managing hard resources
Cash flow is a word that many SMB owners dread hearing, as it can be increasingly difficult to keep a good amount of cash around with the various expenses and investments that need paying.
Having cash on hand in a business is like having blood in your body, without it you will not survive. Even with a regular income there are always scenarios where said income is delayed; perhaps the client doesn’t pay on time or a project gets behind due to unforeseen circumstances.
Most of us know that living pay cheque to pay cheque is a recipe for disaster, so why do we do it in a business?
Limiting expenditures, and always having a sizable buffer, will drastically increase the chances of success. Running a profitable business may look nice on paper, but make sure that some of those profits are saved for a rainy day.
While on the topic of profits, it is often advisable to put money back in a newly started company instead of going on a spending spree. It’s easy to go overboard and perhaps pay off debts, buy a new car or go on an expensive vacation, but for long-term sustainability, it’s far better to invest profits back into resources that can generate even more profits. This can be equipment, staff or IT projects that will increase productivity or make up for knowledge gaps.
All of the above points can be avoided by doing one single thing: careful planning.
Setting up both a short-term and long-term business plan is vital to success, and leaves you more prepared for every scenario. Set realistic goals, and have the company relentlessly work towards them. Each decision should be based on the plan to avoid any impulse decisions where the consequences may be unpredictable.
With a large picture plan, it’s also easier for the company to grow. With clear year-on-year goals, hiring and expansions can be managed with forethought, instead of last minute panic.
A solid budget is also a cornerstone for well-managed finances. Consider hiring an accountant to set it up in the beginning, especially if your knowledge in that department is lacking.
Even with the most airtight plan, there will be hiccups along the way, so being able to quickly adapt is definitely a large plus. It’s common for older SMBs to be quite set in their way, with no scalability due to a lack of planning. What if one of the big clients leave? Or a large contract comes in? Do you have the flexibility and tools to balance the workload?
Don’t fail to plan, plan to fail.
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