10 Mistakes Business Owners Make That Can Seriously
Sink Their Business! By Hayley Solich
MISTAKES BUSINESS OWNERS MAKE 2
Contents 1. Thinking you can do it all alone. .......................................................................2 2. Thinking that you don’t need to structure your work time..............................4 3. Thinking you can do it without the support of your family. ............................6 4. Thinking you should have all the skills you need before you start................8 5. Thinking you can run a business without cashflow. .....................................10 6. Thinking that every customer is going to treat you well. ..............................13 7. Thinking that you can create a website and people will buy from you. .......15 8. Thinking that you don’t need a business plan or financial strategy. ...........17 9. Thinking that you should always be in creating mode. .................................19 10. Thinking that your customers will find you. .................................................21
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MISTAKES BUSINESS OWNERS MAKE 3
Introduction to the 10 mistakes new business owners make that can sink their business! If you are anything like me, you probably are hoping that someone will come along and
Mistakes new businesses owners make that can sink their business!
give you the wisdom to know how to build your business profitably so you don’t have to endure the pain of a failed business. When I started out in my first business about 10 years ago, I was clueless about how to run a business. I had experience being an employee and had run projects as a public servant at a high level, however, I had never built a business and certainly not from scratch with no capital.
The greatest lesson I learned from this first business was WHAT NOT TO DO!!!
Sometimes, our mistakes are the greatest gifts to our lives if we absorb the wisdom. Certainly I have made my fair share
mistakes and have been able to
of mistakes.
make changes to create a more
Fortunately, I applied myself to the
prosperous business.
School of Life’s learning program,
I would also like to point out that
harvesting the wisdom from my
there were a lot of things that I
MISTAKES BUSINESS OWNERS MAKE 2 did right in the first few businesses
I could easily write it from a purely
I started. For example, when I
theoretical viewpoint, as I am a
started Integrity Maintenance
qualified specialist, with accredited
Services, I managed to build up the
qualifications in Small Business
Home Maintenance business to the
Management and Workplace
point where we were booked out 3
Training & Assessing.
weeks in advance in a very short period. So I confirmed to myself that there was no problem with my marketing skills. I also did a fabulous job at bookkeeper, applying what I had learned in the Public Service in terms of accounting processes. The mistakes I made were more of the general big kind that have huge implications for your business. I would like to share these with you, so you can be saved some of the pain I endured. Certainly, I wished
However, this e-book is written more from my personal experiences as a business owner, than from my theory-based knowledge. It is too easy to tell others how to do something without having experienced it firsthand, which is often the case in classroom-based learning. I would encourage you to absorb the wisdom from this e-book and save yourself from making the same costly and painful errors.
someone had shared these things
Without further adieu, let’s get into
with me when I was starting out.
the 10 mistakes that can sink your
Consequently, I am writing this ebook from the viewpoint of having “been there and done that and earned the wisdom the hard way!�
business, which incidentally are true for new or established businesses, although often more commonly experienced by inexperienced business owners.
MISTAKES BUSINESS OWNERS MAKE 2
1. Thinking you can do it all alone. It is too easy when you own a business to think that you have to do everything yourself.
Often funds are
limited and you make the mistake of trying to do aspects of your business for which you may not be skilled or competent.
The problem is that when you take on tasks you aren’t skilled for you waste valuable time and resources, usually in unproductive tasks and this becomes costly to your business, especially if you make errors because you don’t know what you are doing. Although I fully believe that every business owner should know as much as is practical about their business, I can also see the value in employing people to do things that eat up your time and are outside of your expertise, IF you can be making more money doing other things with that time. It is counterproductive to hire someone and then sit twiddling your thumbs while they are doing it for you. An example of this is the accounts. How many new business owners struggle to balance books that they haven’t been trained for or simply may not have a natural ability to handle? Outsourcing is a great way to relieve yourself of the pain of doing jobs that someone else may be able to do in less time and at less than it would cost you to do it yourself. Another example of this is websites. How many business owners try to create their own website, then realise that it looks very unprofessional,
MISTAKES BUSINESS OWNERS MAKE 3 despite the massive investment of their time and energies, and have to go and find someone to either fix it or redo it? It’s the same with design work and marketing. Some people are creative and some people just aren’t. People like me live with creative thoughts constantly surfacing in our minds. Others struggle to have even one creative idea. Our difference is what makes us valuable. It makes sense to use one another in a positive way to achieve our business goals. When we go it alone, we walk a lonely and very frustrating pathway. It’s very difficult to keep all those hats on at the one time. So what can you do to overcome this and still keep your business afloat? Find other businesses with whom to partner. I love the business incubator concept because there are shared resources, which lower the overall costs. I also love working with other business owners who need what I have and we can trade off services. See who is offering the kinds of services you need and see if there is something that you offer that they may be willing to trade. You’d be amazed at how many other business owners are struggling to do what you do well and vice versa.
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2. Thinking you don’t need to structure your work time. This is especially true if you are working from home. There are SO MANY distractions at home…the cleaning, eating, watching TV, playing, sleeping, chatting to friends on the phone for hours and the worst distraction of all – visitors! If you don’t have a plan for every minute of your time, then you are going to waste time. Now before you get excited and start telling me that planning doesn’t work for you, I have to disagree. Planning works for EVERY person. However, it does take self-discipline and a decision. Even the most scattered person will enjoy the peace that comes from having and working a plan. I am a VERY creative person. I live my life organically (which is another way of saying I let lots of things just happen), however, when it comes to work having a loose structure doesn’t always work and it is certainly not THE MOST EFFECTIVE way to manage work flow. A much more effective way is to set aside blocks of time for like tasks, grouping them by order of importance. ie plan a time of the day to check and respond to your emails, a time of the day to do the run around jobs like paying bills and buying supplies etc. Setting your hours of work is also very important. Set them, then advertise them, both to your customers and your supporters! Family, friends, acquaintances all need to know when you are working so they don’t distract you. A business without boundaries will soon bite you. If you desire to have a thriving business, you need to make sure that people know when it is
MISTAKES BUSINESS OWNERS MAKE 5 appropriate to contact you. Having boundaries makes people feel safe and it keeps you safe from being over-used. It’s also important if you want to go the distance because in business, rest is as important as work. What I have learned from my experience with others is that they love your flexibility to the point that they almost push you as far as they can to see if you have a break point. Seriously at times I have felt like one of those blow-up dolls with the weighted bottoms that get pushed over and then spring back up ready for the next hit. People will push your boundaries to see how far they can go. I’ve seen it with negotiating a price for a job and I’ve seen it with debt collection. There is also that “urgent” job that just has to get done immediately. Often when you investigate a bit deeper, it’s not that urgent at all and I’ve actually had one client laugh in my husband’s face when we took a much lower than market value price on a job. It was a nasty way to learn that not every person who is a customer has the same values as you. Service is paramount to a good business but there needs to be a line between good service and being treated like a door mat. So my advice to you is: 1. Set your hours, write them down, stick them up, advertise them, so your family and customers know when you go to work and when you come home and if you work from home, get dressed like you are going to work and maintain the discipline of a work life habit. 2. Decide what you will and will not allow in your business. If you know what your prices are, what your timeframes are, what your terms and conditions are and you have these written down, you will find it more easily to enforce your boundaries with others. 3. Stay within your focus. Once you know what your business tasks include, stay within this and don’t be tempted to continually be adding new services or products to your business.
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3. Thinking you can do it without the support of your family. In most cases, a positive, supportive family is like having your very own cheer squad. If they agree with what you are doing, they will back you all the way. However, if your family are not in agreement with the direction you are taking, you may find that they not only do not support you, but also go out of their way to put roadblocks in your way. When I was working on Pearls Women’s Magazine in 2005-2007, my family initially thought it was a great idea, until it started biting into all my free time. They soon saw that it was a case of giving a lot out for very little return, as it is in most businesses initially you have to invest a lot to get it up, especially a magazine business. The end result, I eventually had to resign from the business and hand it over to my business partners and the main reason was a lack of family support. It was one of the main pavers in the pathway that led to my marriage separation. Thankfully, we have reconciled and moved on, but it certainly bit our relationship hard and taught me a valuable lesson. This relates back to my previous point as well. Define your work hours and what you are willing to give into the business. That way there are no surprises. Negotiate this with your family so they feel like they have a say as well, as they are after all, your silent business partners, especially if you are sacrificing family finance or time with your partner or children to build your business. It is a great idea to be open to the feedback of the people you trust that are surrounding you. I know that when we were starting our first business, there
MISTAKES BUSINESS OWNERS MAKE 7 were some wise old voices at the time trying to give us counsel, however we interpreted their wisdom as a negative attitude and we chose not to heed their advice. Unfortunately, when our business failed, we were the ones with egg on our face and this taught me that sometimes a negative attitude to what you are doing is not always a wrong attitude. We need to be open to hear both positive and negative feedback about our ideas. The other aspect of family support is that you never know who might make a great worker in your business. I have four children and my girls are just starting to enter their early teens. They love working with me in my business and are often willing to do the jobs that I myself hate doing, like repetitive uploading to websites. I am grateful that I can now delegate these to a family member and this is a form of outsourcing, as I can pay them a lesser rate than I would have to pay myself for the same hours.
MISTAKES BUSINESS OWNERS MAKE 8
4.Thinking you should have all the skills or qualifications before you start. If you wait until you know everything, you will be very old before you start your business. In fact, you may not start it at all. It is a mistake to think that you have to know everything before you start. You most certainly will learn along the way and some things you cannot prepare for, as they must be learned on the job. Experience has taught me that where there is a willingness of heart to learn, then there is always the opportunity for advancement. Certainly, if you think that you need a degree to be able to run a business you have bought into a lie, as if you were to check out the men and women who have made millions over the years you may be surprised to learn that many of these entrepreneurs didn’t have the skills to run their businesses when they started out. Nor did they all have degrees. In fact, many were High School dropouts. They simply gained the skills they needed over time. Don’t misunderstand me – I highly value training. Having a degree or other qualification certainly can oil the wheels of your business as it does lend credibility to what you do. However, allowing a lack of opportunity to gain a qualification to stop you from starting your adventure, in my view is an unnecessary limitation that doesn’t need to be there. Remember, where you lack skills you can always hire someone to support you in your business. Going back to the first point – Thinking you have to do it all yourself – this is where outsourcing can really assist.
MISTAKES BUSINESS OWNERS MAKE 9 The big question is: Are you willing to listen, to observe and to learn? These three attitudes are the keys to success in any business.
MISTAKES BUSINESS OWNERS MAKE 10
5. Thinking you can run a business without cash flow. We all know that cash flow is crucial to a business, but I don’t think I realised how crucial it was in my first few businesses. Without cash, you cannot trade because you cannot purchase the materials necessary to run your business. So what were the cash flow errors that I made in the early days of business and how could these have been avoided? 1.
Giving too much credit over too long a period The terms of your credit arrangements with your customers will dictate the level of cash flow into your business. The shorter the cash cycle, ie the closer the payment for invoices comes to invoices being issued, the smoother your business operation will be. So how do you manage this? Negotiate the terms and conditions of your business up front. Most people will pay COD if you are adamant that is how you run your business. At best, offer a 7 Day credit cycle. That way, if people do not pay on time, you will have less time before you can start your debt collection process.
2.
Taking on jobs that require a big outlay of capital without taking a deposit In the early days of our home maintenance business we used to take on any job and regardless, we would use up all our cash reserves to buy materials, then have to wait until the end of the job to be reimbursed. This was totally unwise because our cash flow was completely eroded and then we had to wait for people to pay
MISTAKES BUSINESS OWNERS MAKE 11 for the job. We literally hung ourselves. So how do you manage this? Negotiate up front the terms and conditions of the job. If you know you are going to have to purchase materials, then ask for the cost of the materials up front. After all, you shouldn’t have to carry other people’s businesses or lives. Asking for a deposit shows the person that you are keen to do the work and are asking for a commitment from them to you providing the service. Most people understand that if there are costs that will be incurred that they should be covering these up front. 3.
Completing a large job without asking for progress payments. There are going to be big jobs – the kind of jobs that take several months to complete. It can be very frustrating to have to wait until the end of these big jobs for a payment. After all, you are investing your time, your energy, your electricity and equipment into doing the job and these items incur expense as you go. I have a friend who did a large job for a new business that was starting up. She invested over 500 hours on this particular project. She kept good records of everything and fortunately, she put a contract in place at the start of the project to protect her interests. The project was approaching launch time, and there was a change in legislation. The company she was contracted to decided not to go forward with the business and told her they would not be paying her for her services. This situation is far too common, unfortunately.
So how do you manage this? Negotiate up front the terms and conditions of the job and make sure that you get a signed, witnessed, written contract! Keep good records outlining what you’ve done, when, how and where. Include
MISTAKES BUSINESS OWNERS MAKE 12 in your terms progress payments as you reach certain milestones. This will protect you against someone taking advantage of you.
At the end of the day the shorter the distance between the issuing of an invoice to the payment of that invoice the more cash you have to work with in your business, which is like having oil on the cogs of a machine. A smoother running business is the end result.
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6. Thinking that every customer is going to treat you well. Wow‌this was one of the most painful of my life lessons that I had to learn. As mentioned earlier, we had the customer from hell in our first business. My husband had taken on a job and gone out to quote on storm damage to a pergola. The owner of the house had accepted the quote and we purchased the hardware to fix the job without taking a deposit. When my husband went to do the job 2 weeks after the first storm, a second storm had hit and there was further damage. At this point, had we known our rights and been wiser, we should have decided not to proceed as the man was being dishonest in his insurance claim. However, he spun us a story about getting engaged and being short on cash and we fell for it hook, line and sinker. In fact, my husband was determined to do the best job ever for that customer. To cut a long story short, we had to purchase a lot of extra hardware. We were now out of pocket about $250, which was quite a bit of money 10 years ago when you were running a business on a shoe-string. My husband carried out the work and we printed off the invoice. He met the owner at the house and gave him the invoice and he told he wasn’t going to pay it because it was more than the original quote. My husband was very annoyed but I convinced him to settle for the original quote costing, as I felt it was better to get something than nothing. When he took the original quote cheque from the customer, the man laughed in his face and told him how stupid he was for settling for the quote fee.
MISTAKES BUSINESS OWNERS MAKE 14 This was the nail in the coffin of our business because it really crushed my husband’s spirit. I’m not saying there are many ruthless people like this man out there, but there are people, who because they are focused on themselves and the best possible outcome for their business or project, are going to overlook the needs of yourself or your business. It is up to you to ensure that you protect and defend your own needs and the needs of your business.
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7. Thinking you can create a website and people will buy from you. How many of us have created our websites thinking it is going to make us rich or we are going to have a rush of customers now we have claimed our piece of cyber space? The truth is, a website is just like a shop. If you don’t select your shop based on it’s location, it’s proximity to customers, it’s visibility and it’s appeal and then do all the advertising and promotions that let people know you are in business and how they can buy from you, then you can’t expect your business to thrive. Also, if you don’t offer great customer service and products that are needed, once again, people are not going to buy from you. When you launch your website there are a lots of proactive things you can do or you can get someone to do for you that will help you to get traffic. Many of these are cost effective, but do take a substantial investment of time, hence my reference to outsourcing here. For example: 1.
Set up a Facebook Fan Page to advertise your site and have links from that page to your site.
2.
Set up a Twitter Page for your business and interlink all other social networking sites you post on to automatically post on Twitter.
3.
Set up reciprocal links with other people with great websites and good traffic, especially any government or well established community organisations.
MISTAKES BUSINESS OWNERS MAKE 16 4.
Post articles or videos with a link to your site in them on social networking sites like Facebook, Twitter, Ning.com, MySpace.com, YouTube.com etc.
5.
Make sure that the domain you used to create your website was user-friendly, keyword rich and memorable.
6.
Regularly post new information on your site.
7.
Pay for advertising through Google.com or Facebook.com, as this will generate traffic to your site.
On your site you should include a list-building tool to capture information about your visitors and to start to build a list of potential customers. Offer visitors to your site a free product or service in exchange for their contact details. I have heard people say this has increased their traffic capture by 75% immediately, as people may not email you directly from your site to find out more, but would be willing to give you their email contact details if you give them the right incentive in the form of a free product or service. At the end of the day a website is just another advertising opportunity for your business and should reflect the style and standard of the product you are offering. It pays to make sure that it is well done, as you wouldn’t send out a dodgy flier to a client.
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8. Thinking that you don’t need a business plan or financial strategy. You wouldn’t go on a long journey without first working out how much money you were going to need to be able to sustain the journey. So too, starting out a business needs a well thought through process with a financial strategy of how you are going to manage your business. Too many people think to themselves, “It doesn’t matter if I don’t earn anything, just as long as I break even and cover the cost of the resources.” This is not a business. This is a hobby. You only ever go into business for one reason and that is to make money. All the other things – the satisfaction, the providing a service for the community etc, are by-products of running a business. If a business does not make money then essentially it is not a business. You want to be profitable and therefore you need to be aware of what you have – all your resources including your personal net worth, assets and potential – and how you are going to apply that to get what you want. You also need to be aware of what it actually costs for you to create your product or service. Analysing the costs is essential to this process. A budget for the first two years is a good idea. You need to look ahead and foresee what it is you will need to run your business and how much you need to be charging to make it profitable. You should aim for $11,000 profit in your first year of operation, as this provides you with a solid base for your second year of operation.
MISTAKES BUSINESS OWNERS MAKE 18 You also need to have a plan for the money that comes in. As explained to me by the Financial Trainer from the Westpac bank – you invest out of your profit, not out of your income. This means investment in new technology or other assets should only come from what is left over at the end of the year when everything has been accounted for. A HUGE mistake businesses make is to continually be investing using their cash flow and this can hang your business quick smart. Someone very wise once told me for every cent that you don’t have a plan, it will be a cent wasted and I have to agree. In this day and age where so much information is readily available, I would encourage you to track down a business budget and a business planning proforma online and then do the hard work of thinking through your whole business. If you are unemployed you may be eligible for a Small Business Course through the NEIS program. Google NEIS to check your eligibility. The value of doing this process first is that you get a more accurate idea of whether or not the business is a proven business concept and who exactly your target market is, what you have to offer them and how you are going to do that. It will also help if you are needing to borrow money from a bank or other invester. It is also a sign of your level of professionalism and you would be amazed at how much more focused and able to manage opportunities you become when you have a plan and you are working to that plan.
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9. Thinking that you should always be in creating mode. Now speaking as a creative person, it is a huge risk to your business to consistently be creating new products or services. I know that it is exciting and thrilling, but is it really wise? The creative process is a resource dense phase in your business. If you spend all of your time creating something new or learning a new skill, you never become a master of anything in your business and I have learned from experience that masters get paid a lot more than jack-of-all type people do. When you start something new, you are slower than you would be if you’d been doing it for an extended period and you make mistakes. If you live in this zone, you never get the benefit of being good at what you do and being quick at it. You don’t get the return on your investment. It is too easy to down tools on something because you’ve become bored with it but remember, to some of your customers it is going to be the first time they have seen or experienced that particular product or service and to them it is fresh and new.
MISTAKES BUSINESS OWNERS MAKE 20 The key is to balance the introduction of new products, skills or services through effective planning. Many of the large companies are working on their next product when they release a product. However, they do let that product run it’s full life cycle and it is only when it is on the downward curve of it’s life cycle that they introduce the next product, good or service. Be wise. Make the most of your investment of time and capital by becoming good at what you do through repetition.
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10. Thinking that you don’t need a mentor. I’m confident that if you look behind people that have achieved a high level of success that you will discover mentors who have guided them along the way. A good mentor is worth their weight in gold and it is a trap to think that you don’t need one in your business. In fact, I would say to you, go and find someone who is running their business to the level of success that you are interested in achieving for yourself and ask them if they would consider mentoring you. If they say yes, then you will have the opportunity to circumnavigate your journey, short cutting the whole process. In some ways my sharing this information with you is a form of mentoring. However, having a flesh and blood person that you can ask questions from and be guided by is really helpful in accelerating your personal growth and the growth of your business. What does a mentor do? A mentor can: -
Help you to stay focused
-
Share resources, information and their experiences with you
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Challenge you to help you stretch yourself
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Help you to avoid unnecessary grief
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Help you to celebrate your successes
There are some fantastic mentoring programs that are structured to keep you on track. Check out The Creaticians Make-It-Happen Program which is
MISTAKES BUSINESS OWNERS MAKE 22 designed to help new business owners establish their businesses or accomplish new projects. A teachable spirit is a great gift to a new business owner, just as is a good teacher.
MISTAKES BUSINESS OWNERS MAKE 23 BIOGRAPHY OF AUTHOR Hayley’s name means “ingenuity” and this adequately describes her approach to life. She is creative, resourceful, inspirational and motivational!
With over 25 years of work experience in a broad range of industries, Hayley Solich has demonstrated that she has what it takes to rise to the top in whatever field of endeavour to which she applies herself.
As a performing artist she achieved her dreams by age 23, touring Western Australia with Moving Images Performing Arts Company and receiving a standing ovation at Town Hall to an audience of 15,000.
As a public servant for the WA Government, Hayley quickly rose through the ranks from a Level 1 Officer to Level 4 within just 2.5 years without a formal qualification! She has also successfully completed roles at Level 5 in the Human Resources Project Management field.
As an Employment Consultant working with long term unemployed, with no previous experience in the industry, within just 9 months Hayley was ranked in the top 4 consultants out of 40 for two quarters and promoted to a Site Senior role.
Hayley is the author of the e-book, Keys to User-Friendly Leadership. She also co-founded and co-edited Pearls Women’s Magazine, a high gloss women’s magazine based in Perth, Western Australia and is the author of the Kaleidoscope Effect Journal and also Catching the Wind of the Spirit. Her short story, Beyond Winter, has been featured in Pearls Women’s Magazine and has also won awards. Hyaley is a feature writer for national magazine, Finally at 40, with several articles published. Hayley is also currently writing
MISTAKES BUSINESS OWNERS MAKE 24 Kath Mazzella OAM’s biography, to be released later this year.
Hayley’s practical solutions to managing people issues have placed her in the workplace as a Business and Motivational Trainer and Mentor, where she has worked one-to-one, and with small and large groups through TAFE.
Having started several businesses from scratch with very little capital to invest, Hayley is very aware of the gauntlet new business owners have to traverse to create a successful business.
Her creative problem solving skills mean that she is able to think outside of the box and easily come up with solutions to complex issues. She is action focused and helps clients to develop clear pathways towards their goals. Her broad base of work experience means that she is highly versatile and able to speak with authority about a range of subject areas common to business.
People consistently describe her as inspirational because of her flexibility and resourcefulness, giving her the pseudonym, The I Can Woman. Her I Can attitude is contagious and she is keen to be a world changer, one person at a time.
With the introduction of her business, The Creaticians, Hayley has really found her calling in life, helping small business owners and individuals to package or re-package, brand or re-brand, and launch or re-launch themselves, their products and/or their businesses. From business marketing tools right down to personal styling, Hayley has a rebranding concept to suit all types of clients and relies heavily on her intuitive gifting which is one of her personal strengths.
MISTAKES BUSINESS OWNERS MAKE 25 To find out more about Hayley’s writing, visit HayleySolich.com or TheCreaticians.com to find out how Hayley and her team can best support you in your business or personal endeavours.