Small businesses take more organization and planning to stay open during the bad economy. The smaller businesses tend to have less profit to fall back on when their revenue is low. There are many mistakes the small business owner can make during these times that can cause them to go out of business. The following are common mistakes made by businesses owners.
- Lack of Good Planning — Having a solid business plan is critical to the survival of any business. Business plans need to include long and short term goals. An action plan is needed for reacting to fluctuations in the business sales.
- Poor Accounting — There are several financial practices that can make or break a business. Excessive and poor spending habits will bankrupt a business. Getting rid of the unnecessary services and products will save the company money. These services and products leach money. Eliminating excessive purchases is necessary. Something that is often overlooked is tracking small purchases. The small purchases add up quickly and can end up costing more than a single large purchase. Using the internet to find discounts for their products will help the company save money. Companies such as Amazon use a website called Groupon.com to show all of the discounts and promotions they have available.
- Using Credit Cards — Using credit cards to get through the rough times is a bad. The interest charges add up quickly. If the balance cannot be paid off fast enough, the amount of debt that will accumulate will become more than the business can afford.
- Lack of Cash Cushion — Many businesses will reinvest their profits right back into their company. But when all profits are reinvested, that leaves nothing in the savings to use for the emergencies. Having a cushion allows the company to ensure the money is going where it is needed when it is needed.
- Expanding Your Business — Trying to expand your business to bring in more profits is inevitably a mistake. The expansion uses up the existing profits. The expansion also adds to the expenses. There will be more cost to run the expansion.
- The Owner — During hard financial times, the owners often becomes over stressed. An overstressed mind doesn’t think clearly and is more likely to make bad decisions. They are more likely to avoid making difficult decisions. They also won’t seek out advice nor ask for help.
- Staffing Issues — The staff is the backbone of a company. Without good communication, the staff and the owner will not be on the same page. Some mistakes the owner can make is failing to delegate. Failing to take time for employees. Not holding meetings to keep the staff involved.
Some business owners have a sink or swim, do or die mentality. For some businesses, their attempts to stay out of the red turns them deeper into the red. But with focusing on the right business plan the business can pull through the hard times.