Business owners are a different breed of people! They are always high on intuition and like to do things in the heat of the moment which could be great but also makes you prone to mistakes. Here are 5 common mistakes we have seen repeatedly amongst business owners.
1. Failing to Create a Business Plan
People are excited to open their first business. Business owners would go straight to running the operation without any plans. Many business owners today do not even know what is involved in a business plan.
Business plan helps owners identify their target market and see if their products or services are feasible. It covers your pricing strategy, marketing strategy & financial strategy. Preparing a financial plan for the business will help owners execute financial decisions that will help them in the long-run. It will determine the budget and keep track of the business cash flow.
Without the planning phase, owners would be running the business in the dark.
2. Failing to Update Books
One common mistake SMEs make is failing to update their books. Whether it might be recording small expenses or receiving a huge amount of payment from their client. Some business owners tend to do it the next day and before they know it days, weeks, and months have already passed.
It is important to keep track of all your transactions to determine if your business is making profit or not. It also helps you see the costs of operation every day. In that way, you can make effective and efficient decisions and improve business operation.
Make it a habit to record transactions daily.
3. Mixing Personal and Business Accounts
For start-ups, failure to separate their personal and business accounts is a very common mistake they make. Many business owners feel that is it their money anyway so it’s fine to mix personal and business transactions.
Failure to separate these accounts can affect both significantly. For example, you may not notice how much of your savings have been used for business operations. Likewise, you may not realize that your business might be affected by using the money personally rather than investing it on operations. It is important keep these separate to monitor your business growth and personal lifestyle.
If you do mix them, make sure to separate them and track them very regularly. You can invest money in an accounting software to do this for you. Accounting software has helped owners to scale and ease up their businesses. It is important to know the available accounting platforms and differentiating each. Some platforms are intended for small to medium-sized enterprises and some are for big corporations.
You can request your bookkeeper to do this on a fortnightly or monthly basis. Just because accounting platforms are getting easier does not mean you should do it yourself. I am sure you must have scissors in your home but do you cut your own hair?
They would think “Debit and credit? Ledgers? Bookkeeping? Heck, I can do all of that.” Accounting is a lot more than just the terms and the numbers. It is keeping track of your profit and expenses, filing your taxes, knowing where to add entries, and doing everything else without any errors. It is better to invest in an accountant than to suffer the consequence in the long-run.
It is imperative for business owners to hire the right accountant and suitable software for the business. Better pay for the right decisions than to pay for the wrong ones.
Don’t forget the Div7A Tax Implications for Directors’ Loans in Companies!
4. Do-it-yourself Approach
People who are new to business may have all the time and money in the world when planning. But as soon as you start operating your business, you will have less and less time doing tasks and be limited by your budget. A Successful Entrepreneur is very good at delegating duties and creating a well performing team.
If you want to stay small and micro manage everything then you may as well be an employee manager for someone else. At least you won’t have to worry where the next dollar is going to come from.
Your role is to do the tasks which will affect the business the most. Spend 38 hours of your week growing your business, automating processes, increasing efficiency and developing the culture instead of doing the bookkeeping yourself (thinking you’re saving money!).
If you want to be successful, think like a successful person.
5. Not Hiring Smart People Sooner
When a business is growing, entrepreneurs will have less time doing small tasks. This is the part where you need to hire a smart team around you. Jack Ma of Ali Baba says he hires smart people and then asks them to teach him stuff. That’s a very modern way of Entrepreneurship! Having an open culture of growth, feedback and learning can do wonders for your company.
A common mistake is that many business owners would just hire a family member or anyone without the right experience and work attitude. They would hire anyone just to relieve them from other tasks without thinking of the consequences in the future.
Hiring smart people will not only free you from these tasks but also add significant value to your business.