There are many different ways to run a business; that's why a lot of us went into business for ourselves. It's liberating to be the one calling the shots, to be in control of your professional relationships, and to learn from your experiences along the way. Whether you have decades of experience under your belt, or are fresh to the world of self-employment, it's important to avoid committing the professional missteps listed below, as they can be detrimental to the success of your company and your professional reputation.
1. Biting off more (debt) than you can chew.
One of the biggest challenges in business is finding the capital to make investments and work towards growth. Items like equipment, software and marketing can all be necessary expenses when you're starting up, and it's tempting to take on debt to help get things up and running.
I'm not saying that debt is inherently bad, or that you shouldn't use it to get what you need for your business. However, if you're not careful, before you know it you've spent all of your borrowed capital on items that don't actually help you generate revenue, and now you have a monthly payment to your creditor along with all of your other monthly expenses, which hurts your bottom line.
If you're going to use a loan or a credit card to help you when starting your business, be very conservative with what you use that money for. If you're considering buying an item, think about whether or not it is critical for your business and whether it will help you generate revenue. Also, consider if there may be a more cost effective option that will meet your needs (both quality and budgetary).
Pro Tip: When you're considering buying something on credit, look at your current interest rate and consider how long it will take you to pay off that debt. Calculate the total cost (price+interest) before making your buying decision.
2. Failing to deliver on your promises.
There are always going to be clients that have unrealistic expectations, however as a business owner, do your best to ensure that these expectations are not as a result of promises that you have made. If you cannot complete a project by the deadline that your client desires, don't tell them that you can. If you're not qualified to tackle a task that your client is asking for, you'll be much better served to be transparent about this up front.
If your client has expectations that are unreasonable, then there is likely no way to please them. However, if you fail to deliver on a deadline that you have committed to, or compromise quality because of your competencies, then it's not that unreasonable for your client to be angry.
When a client asks you if you can complete a task, ask yourself a couple of questions before you respond to them: Are you qualified to complete the work? Can you do it in the amount of time that your client is expecting, or for the budget that the client expects? If the answer to any of these questions is "no", you'll benefit from being candid with your clients from the start. This doesn't mean that you may not be the right person for the job, but you should be honest with your clients about your reservations so that everyone is on the same page as the project progresses.
Pro Tip: I try to always add a "buffer" when I make promises to clients. For example, if I think that I can have a project completed by Wednesday, I tell them that I will have it for them by Friday afternoon. By doing this, I save myself stress and the client irritation when unforeseen challenges make the project take longer than anticipated.
3. Not keeping up with your taxes.
Depending on the industry you are in, it's possible that you have sales, excise or other tax responsibilities associated with your revenue. If you're an employer, then you have state, federal, Social Security and Medicare taxes to pay. If you plan for these taxes properly, then they are easy to stay on top of and be in compliance with. However, if you get behind on any of these responsibilities, it can be very difficult to catch up and you will likely be subject to penalties and interest. Suddenly a small tax liability has become a big tax liability, and that can put you out of business.
Consult with an accountant about your reporting responsibilities. It's possible that your business sales taxes or employment taxes are simple enough that you can take care of them yourself, but you will want to make sure that you have a complete understanding of what those responsibilities are so that you don't end up in hot water. Once you know what you are dealing with, you can decide if you want to do DIY it or hire a professional.
Pro Tip: If you collect sales tax or withhold taxes from your employees, consider setting up a separate bank account to transfer that money to on a regular basis. If you total your sales tax figures once a week, for example, and transfer that money out of your operational account, then you know you will have it when it's time to file your sales tax return. If you leave in the operational account, it can be easier to spend and come up short come tax time.
4. Hiring someone you can't afford to pay.
You want to do things right. Because of that, you've hired a freelance web-designer, a lawyer and an accountant. Bummer is, they completed their work before you've generated enough revenue to cover the costs, and now you can't afford to pay them.
An alternative, but equally sinful scenario is hiring staff to help you run your business but not having the money to pay their wages and your employer portion of the taxes on payday.
Just like you rely on your income to pay your bills, the people that you have hired need their pay to make their ends meet. When you hire someone and reach an agreement about a price or rate, they work under the assumption that you are going to pay them on time according to that agreement. If you're not paying your employees, you're taking food off their table. If you're not paying a business that you have been a customer of, you're taking food off the table of their employees. Neither scenario is fair to the people who worked for you.
Negotiate up front. If your web-designer quoted you $2,000 for your website, but your budget only allows $800, ask him if he is willing and able to work within your budget. Remember that he has overheads and costs associated with his business too, so don't assume that his price should be whatever you're willing to pay. He may tell you that he cannot complete the work for that price -or- he may be willing to compromise in order to get your business. However, if he said the website would be $2,000 and you agreed, don't try to negotiate it down to $800 once he has completed the work.
Pro Tip: Treat your word as your bond. If you committed to paying something or someone, as a business owner you may need to compromise your own pay to meet your obligations. It's one of the drawbacks of going into business, but meeting your obligations in a timely manner will help you to grow your professional network as well as your positive reputation. It works the same in the inverse; if you refuse to pay your web-designer, he might tell his network not to do business with you. The bottom line here is if you can't afford them, don't hire them in the first place.
5. Losing Focus or Motivation.
Sometimes, inspiration can get the best of us. It's great to always be thinking of ways that you can innovate and change the game, strategies that will set you apart from your competition, and new products or services that can help you expand your brand. However, if you're not careful, these ideas can become butterflies, and chasing them can distract you from the task at hand.
Alternatively, there are times as a business owner where it can feel like all work and no play, or that all of your hard work is not paying off. This can make you stagnant, and distract you from what you need to be working on.
Have a notebook or document where you keep track of your ideas and business goals on a regular basis. Then, create a strategy for when you can realistically commit time to working on these goals, and follow that plan once you have it. This will keep you focused on what is in front of you, meanwhile keeping you motivated because you're reminding yourself of your goals on a regular basis.
Pro Tip: Regularly designate time in your schedule for goal setting and development. At my firm, we have a Monday morning meeting that I like to call Marketing Monday. While we have our morning coffee and click back into work mode, we discuss any and all marketing or development ideas that anyone has had in the last week. Even if the ideas don't make it into the business plans, it keeps the creativity flowing and communication open.
6. Not admitting when you're not the best person for the job.
Most businesses have a ton of different needs; advertising and marketing, accounting, legal, design work, sales, etc. As people, we all have strengths and weaknesses. As business owners, it's important to be realistic with yourself about what your strengths and weaknesses are. For example, if you decided you wanted to own a bar, but have never worked at a bar before, it's in your best interest to hire an experienced bar manager to help you learn the industry. I like to think I am a pretty good accountant, but I know enough to know I need to outsource my IT support.
Take some time to consider the needs of your business. Then, consider whether you are qualified to meet that need, and if you're the best person to meet that need. Yeah, I could probably spend an entire day of my time researching the various IT solutions for my business needs, but my time is better spent elsewhere (generating revenue or building business). If you think you can maybe meet the need, maybe not, you should put some serious thought into hiring an expert.
Pro Tip: Every industry is different. If you are entering an industry you have never worked in before, find a consultant or a mentor that has been in the industry long enough to know the pitfalls and unique challenges. This can be the difference between building a profitable business, or having a very expensive hobby.
7. Stop Learning.
No matter how long you are in business, it's important to stay in touch with the changing times. If you're not keeping track of what everyone else is doing in your industry, someone could change the game completely without you noticing, which could lead to your company's demise. Don't believe me? Ask Blockbuster.
Find a way to stay connected with your industry; subscribe to industry magazines or journals, join networking groups within your industry and keep tabs on websites that pertain to your competition and your customers. You don't have to be watching 24/7, but you should try to keep your hand on the pulse of your industry.
Pro Tip: Professional networking sites such as Linkedin have excellent communities set up where you can talk to your peers about what they are experiencing. It's quick, easy, and can be participated in and monitored whenever you have time.