QUESTION: Of all the pitfalls in the marketplace, which do you consider the most common and how can I avoid making these mistakes?
ANSWER: As a small-business owner, you can have a solid business plan, a great concept and a good reputation in the community. Yet a single mistake can be all it takes to upset your apple cart.
Consider these common errors that can doom small companies:
- Relying too much on one “big” customer: Never, ever have all your eggs in one basket. One customer should never account for more than 10% of your business.
While it is great to have a large, well-known account, these same accounts may expect you to be on call 24/7 and, at the same time, cut your margins to the bone. As in any investment, it is wise to spread your risk.
- Losing key employees to competitors: If your shop consists of three “key” people and you lose one to your competition, you have lost one-third of your workforce.
Remember, good people are hard to find. Shower them with praise when warranted. Involve them in decision-making. Be aware of what your competition offers their employees and make sure that compensation is not an issue.
- Trusting a bookkeeper too much: Remember, everyone is honest until circumstances in their lives dictate desperate measures.
- Maintain control over your company’s money. Do not give a bookkeeper check-signing authority.
- Be sure to include a fidelity bond as part of your insurance program.
- Thinking you will never get sick or become unable to perform your duties: In a small business, you are the engine that drives the train. If you have a long-term illness or become disabled, it could mean the demise of your business.
First, do not work so hard that it impacts your physical or mental health. Delegate important jobs to capable employees and mentor their progress. Also, consider buying disability income insurance.
- Working with unstable suppliers or distributors: If your operation depends on others for the goods and services you provide, it is critical that you take great care in the selection of those with whom you do business.
Always ask for customer references and work with multiple suppliers whenever possible.
Gray Poehler is a volunteer with the Richmond Chapter of SCORE, Counselors to America’s Small Business. To ask a question or request free and confidential business counseling, go to Richmond.score.org/mentors. Learn more about SCORE’s workshops on the website or by calling (804) 350-3569.