As an employee I have had the blessing to work exclusively for small and independent businesses for easily 75% of my working life. In between bouts of schooling throughout my 20s, I worked for small businesses including cafes/restaurants, artisans and home offices, an independent hardware chain, and a small post-production facility (where I discovered my love of filmmaking before going back to school). Some of these businesses were not very successful, some were incredibly successful, and each taught me important lessons about what works and what doesn't when you're running a small business.
I had the chance to see businesses do it right and do it wrong, and developed my own personal list of the pitfalls small businesses fall into that take them out of the running for the consumer dollars they need to stay afloat. Here's the working list I've come up with over 15 years working for small businesses of every stripe, both successful and unsuccessful.
1) THINKING SMALL
In actuality this entire list is probably just variations on this item, simply because it is so important. As a small business, every decision you make is proportionally larger to the functioning of your business than day-to-day decisions made by employees or CEOs of larger organizations. If you decide not to do something one day, it's the equivalent of a whole department taking the day off for a large corporation. All the salaried employees still need to get paid, all the overhead costs remain, the lights stay on, the products are manufactured and shipped, the ads run and the deliveries arrive. When you decide you can let something go until later, or that you're only going to worry about one aspect of your your business and not another, or when you bury your head in the sand about things that need to be accomplished, you're shutting down half of your business and still expecting it to function somehow.
In my opinion, this is the worst mistake a small business can make.
When things get tight, they go into "survival" or "bare minimum" mode,
and stop thinking about growth. When it comes to business, you have to BE A SHARK. Not in the way you usually think about it, though - not every business has to function on a predatory model, and that social darwinism crap about survival of the fittest never has and ever will make sense in advanced human cultures which are defined by cooperation. You have to be a shark in the other way. The
you-have-to-swim-forward-or-you-will-die kind of way.
2) SKIMPING ON ADVERTISING
Advertising is expensive. Frequently when tough decisions are being made about where to spend money (or not spend it), advertising is the first thing to go. If you aren't advertising, you aren't putting yourself in a position to bring in new customers. It doesn't matter if it's fliers you pay a kid in the neighborhood to pass out, or pay-per-click online advertising through
Google Adsense or
social media, you have to be doing something.
Here's a great article on how to ballpark what your advertising budget should be:
http://www.entrepreneur.com/article/54436
Oh...and if this article looks like gibberish to you, see item #3 below.
3) FAILING TO DO THE NUMBERS
If you had an accountant you found out was taking a wild guess every time you asked him for concrete information about your business, you wouldn't keep that accountant around for very long. Even if the guesses were good, and fairly close to the actual numbers, ON PRINCIPLE you wouldn't pay an employee or a contractor who wasn't doing their job. If you run a small business and you aren't producing hard numbers based on real information, you are that accountant - you should fire yourself and hire somebody who knows what they're doing. Here are a few numbers every business owner should know at any given time in operation.
What are your overhead costs?
What are your monthly goals?
How much profit do you need to make each day (or week, or month, depending on the industry you're in) in order to be turning a profit?
What is your annual cost for employees and contractors?
Do you know if, how, and why these numbers fluctuate seasonally?
Do you know what environmental factors affect those fluctuations?
Do you know what other industries you are dependent on? This could be other businesses who purchase your goods and services or whose employees purchase your goods and services, or industries whose health and price fluctuations affect your operating costs.
What are your goals for growth?
How much additional income each month would constitute that growth?
4) DOING IT ALL
This seems counter-intuitive to running a small business, since an inherent part of a small business IS that you do-it-all. The simple fact, though, is that if you aren't doing it right, you might as well not be doing it. This applies to all areas of your business. If you aren't doing your numbers right, you aren't doing your numbers. If you used some cut-rate service to put your website together, and didn't pay attention to the details or the quality of the functioning and the graphics
you may as well not have a website. You will loose customers. You have lost customers. You're loosing customers right now.
You might be your only full-time employee, and that's fine. I guarantee you that wherever you are there are competent, professional freelancers looking for work doing the work you need. If you haven't put together a plan for growth, with specific implementation goals and milemarkers...you're guessing at whether you're on track or not. For more on this, go back to item #3.
5) IGNORING THE IMPORTANCE OF YOUR BRAND
Now, it's possible I'm a little biased toward this one since I work in the creative field. Brand is key to the work we do for our clients, and we pride ourselves on our sensitivity to brand, creating custom graphics and spending a lot of time researching our clients' brand strategy and identity as a business before creating anything for them. It's also important TO US as a business. When I went back to school (the last time...the one that stuck) I didn't just pursue filmmaking or video production (the salable skillset) I went for a multimedia degree in order to be in a position to sell it. I create all our print graphics, design and maintenance for multiple web properties, and take the lead on all correspondence, copy, and other written representation of the company. In each of these arenas I am aware of projecting and maintaining our brand(s) at every moment with no room for error.
The number I was taught in school was 40% - a brand is 40% of the value of a company. For us, it's probably 75% right now. Our brand, our style, our presentation and engagement and reliability are the only thing that make us different from every other asshole out there with a camera. And there are a lot of assholes with cameras right now. Brand doesn't just happen. It is crafted, developed, committed to, and followed through on. See item #4 - if you aren't branding deliberately and intelligently, you might as well not be branding at all.
6) JUMPING OVER A QUARTER TO SAVE A NICKEL
Early in my working life, one of my first corporate stints was slinging grease at a Valvoline in my home town. This was the joke the regional director had about the store manager, that he was such a cheapskate he would jump over a quarter to save a nickel. One day he came into the store when our manager wasn't in, and left a quarter and a nickel laying on the floor
'tell him it's a present from me.' At its core, there is a real truth in that about the difference between upper and lower management in the corporate structure, and ultimately the differences between the working class and the executive class in the country.
Have you read the
5 Stupidest Habits You Develop Growing up Poor? It's a great read on how bad habits get ingrained in our functioning, and we stick with them even when they ultimately work against us. The top item on this list of bad habits that define the poverty mentality: you only spend with the short term in mind. The same thing goes for businesses. In an effort to save a few bucks here and there, small businesses
frequently fail to make the big purchases that can lead to real growth.
If you're "getting by" on old equipment you're probably leaking money
in small doses, rather than putting the cash in up front to run more
efficiently and ultimately keeping your costs down (see #3). If you're not spending money on
advertising, you're loosing money in potential sales (see #2). If you don't want to spend a few hundred dollars on a logo, or a few thousand on your online presence or video presentation, you aren't investing in your own growth. If you're cutting hours to save on pay, you're setting yourself up for a downward spiral of productivity.
7) WORKING HARDER INSTEAD OF WORKING SMARTER (DOUBLING DOWN)
We all know the adage about doing the same thing and expecting different results being the definition of insanity. It's easy to see how this applies to personal situations; the girl who always falls for bad boy always gets her heart broken, the introvert says the wrong thing and is misinterpreted as an asshole when he's really just shy, the control freak pushes the people they love away by trying to dictate their actions.
Businesses can fall into the same self-defeating patterns. All businesses are made of people, even the largest ones. How effectively or efficiently an organization takes advantage of these
assets - its human capital - varies greatly with different corporate
structures and cultures, but all companies have available to them the advantage of the cumulative power of the range of outlooks, opinions, and insights from all their people. That means that larger companies have a much lower chance of falling prey to the single-mindedness that can trap an individual.
You work for yourself because you have a skillset worth selling, and for which people are willing to pay you respectably. JUST BECAUSE YOU'RE GOOD AT WHAT YOU DO, IT DOESN'T MEAN YOU'RE GOOD AT EVERYTHING (see # 4) and that includes strategic planning. If you're working increasingly long days and not seeing a corresponding growth, you may not be using your time efficiently. Sometimes walking away from a project in order to pursue something that makes more strategic sense is important. It can be hard to know when to let go, and this can get pretty zen - the past is done, every moment is a clean slate, etc. What it comes down to is this: just because you've already wasted five hours doesn't justify wasting the sixth.
My rule of thumb is this: with each task you must know what you're doing, why you're doing it, and how it serves your long-term goals. This can help pull you out of pointless tasks you've wrapped your pride around, and help you figure out when to drop a client, when to take a risk, and when to bend or break your own rules, and when to put your foot down. It can also help you slog through the tougher parts (see #3) of small business management.
8) TAKING THE WORK HOME
This is the small business sin of which I am most frequently guilty. I don't turn off. Ever. My husband and I run our business together. We work at home, on the road, over the weekend, late into the night, early in the morning, whenever the work needs to get done. I know, though, and we have experienced first hand, that running at full speed 24/7 can only, inevitably, must lead to burnout. You would never let your 9-5 stress you out as much as you let your own business. For periods of time - whatever the right amount of time is for you - you have to be off the clock.
...and on that note, after FINALLY launching this blog and getting my first post up, it's time for me to be off the clock for a while.
