So, you’ve gone to all the effort to get your venture off the ground and survived the start-up phase. Aside from the fact that you’re too busy to socialize much, or take holidays, your business appears to be thriving. In your circle of friends you might even be a bit of a hero.
Congratulations might be in order. In starting a business, you’ve achieved something that many people dream about but never do. But are things as rosy as they seem?
As a business owner and coach, I am privileged to meet many good people building bustling businesses, but unfortunately too many struggle or fail due the following deadly traps. Here are the most common pitfalls that, if left unattended, will knock your business off the rails and into the gutter.
1. Too Many Stupid Decisions. It takes a balance of thought and action to be successful in business. Too much thought will cause you to miss opportunities, and yet thoughtless action will lead you into the jaws of bankruptcy. Everyone makes mistakes, but too many blunders will keep a business in the poorhouse. It takes relentless due diligence and a lot of street smarts to succeed. Survivors tend to respect risk, do their homework, learn from mistakes, and keep losses to a minimum.
2. Aunt Martha’s Whacky Bookkeeping. Scratch the surface of any failing business and you’ll discover they’re either doing their own books or have a flimsy arrangement with some friend or relative who doesn’t know squat about doing bookkeeping. Every once in a while the backyard bookkeeper works out, but mostly it leads to disaster. The bookkeeping system is the foundation for all business decisions. Without timely and accurate financial information, a business owner is running blind and it’s only a matter of time before he hits a wall. Successful entrepreneurs hire competent bookkeepers and treat them like gold.
3. Urinating In the Tax Collector’s Cornflakes. It’s easy to understand why business owners might be at odds with tax authorities. The nice folks from the taxation office always scoop more money than we think they should, they tend not to play nice if you get behind, and they’ll cheerfully take your business down if you can’t afford to pay. Once you’re behind on taxes, you really fall hard because of the deadly two-punch penalty-interest combination that spins a seemingly innocent amount into a blazing concern in no time at all. You don’t have to love taxes or the people that collect them, but you do have to respect them.
4. No Rainy Day Fund. When a business begins to generate cash flow there are financial distractions. There is a compelling urge to peel off a bit of cash to buy special toys or trinkets. While it’s important to reward yourself for all the hard work, there comes a time in every owner’s business life when a personal nest egg is needed to avoid a financial black eye or even a bankruptcy. The ideal time to save money is when things are going well; the problem is—when business is booming, the last thing on anyone’s mind is saving. If you haven’t already done so, open a savings account and starting saving money today. When that rainy day comes, you’ll be glad you did.
Too many new business owners fall prey to these and the many other traps identified in parts two and three of this article. Stay tuned to learn about other business killers, such as uncollected receivables, high debt, relentless low-bidding, and more.