7 Small Business Mistakes to Avoid

The Pebble smartwatch was funded on Kickstarter

The makers of the Pebble smartwatch avoided one of these small business mistakes.

When you’re running your own business, it’s easy to get lost in the weeds and miss some of the small business mistakes you’re making.

Here are some of the mistakes that I’ve made over the years, plus some mistakes that some of my podcast guests have shared with me. Caution, I’m still a work in progress myself so I’m likely still making many of these mistakes.

1. Being Cheap – One of My Biggest Small Business Mistakes

When you’re not making any money with your upstart business it makes sense to pinch your pennies and go the cheap route. Somewhere along the way though you start making money. The problem arises when you never use that earned money to re-invest into the business.

I’m still cheap in a lot of ways. But more and more I ask myself the question, “could I be spending money on my business in some way that would propel me to greater heights?”

You should be stopping to ask that to.

2. Borrowing Money Before Your First Sale

Without “funding” some businesses would never go from good to great. It’s true that financing can take a business to the next level. But I would really question any business that’s looking to generate it’s first sale by using debt.

If the product or service is needed then shouldn’t you have a paying customer, or at least the promise of a paying customer before you go into major debt? Look no further than the crowd-funding of the Pebble watch to find an example.

3. Co-Mingling Your Finances

One of the best things you can do for your maturing business’ finances is to open up a separate bank account. It’s fine to co-mingle business funds when it’s just coming out of the hobby phase, but there are many reasons to go separate once you get serious.

The obvious reason is taxes (i.e. makes filing a heck of a lot easier), but I think the more important reason is so that you can get an isolated picture of your finances so you can start improving your business.

4. Hyper-Focusing on Sales

The business owner that says they had $1 million in sales last year sounds pretty impressive until they tell you that they also had $1.1 million in expenses.

“full of sound and fury, signifying nothing” – Macbeth by William Shakespeare

As a business owner you should be focusing on profit (i.e. the bottom line), not just sales. This means you need to be reviewing and reducing your expenses. You also need to be analyzing your profit margin and attempting to find the right price-point for your product or service.

Appropriately, my friend in sales, David, contributed this point.

5. Not Setting Goals

Quite often, we entrepreneurs fall into our business ideas because of our passion or latest interest. Setting goals for the business, at least initially, may not have come to mind. And goals can sometimes be the antithesis of a good business idea. Goals get in the way initially.

But at some point you’re going to need to start treating your business like a business and provide a framework for your creativity and ingenuity to exist within.

Make sure your goals are SMART and break your goals down into phases and task that can go on a calendar so you actually make time to accomplish them.

6. Building a Glorified Job for Yourself

Be honest with yourself. Is your business just a glorified job? Meaning, did you create something that has you acting like an employee vs an owner? Do you have freedom, creative license, and are you building your brand?

I’m so proud of having left the corporate world and having started my own gig. But I still have to do certain things everyday or week that keep me from being truly free from my business. Not that I want to escape my business, but I need to be able to if I want to…that’s the difference. I’m still a work in progress in this area. How about you?

7. Assuming You Can’t Do Something

You’re a business owner because you were willing to take a risk, no matter how small. That attitude should extend to all parts of your business. Never assume you can’t do something.

I’m not talking about not outsourcing or trying to do it all. I’m talking about not limiting yourself to do more and more with your business. Want to revolutionize your industry? Go do it. Want to be the first to offer something? Make it happen.

So those are some of the more common small business mistakes owners make. Are you making any? Are there any other mistakes you could add to the list?

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Last Edited: March 20, 2013 @ 12:23 am
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. Nice list, PT!  That first one, “Being Cheap,” sort of tapped me on the shoulder this morning.  While I have been proud of doing things without much money, and that’s been a useful tactic a lot of times, I have to admit that sometimes I have been guilty of not spending when I should have in order to make my business better.  Sigh… I think I’ll be getting back in touch with that guy who wanted to sell me some advertising a couple of weeks ago.   heh…   Here’s one that I think is related to your 7th suggestion, “Don’t Assume You Can’t Do Something.”   It’s this: Don’t Assume That You Don’t Have Something Special to Offer.  I have noticed that people often say that they don’t have any special skills, or there’s nothing especially valuable about what they can do, and they severely limit their business thinking because they don’t know their own strengths.  Sometimes people who can do something easily assume that everyone can do it as easily as they can.  They take their own skills for granted.  For instance, a skillful line cook was telling me about making dinner for a friend, who loved the food and asked for the recipe.  The cook was amazed and said, “What?!  You just ate it!  How can you not know how to make it?!”  You see, she had the special skill and talent of understanding food so well that she could usually know how to make anything just from having eaten it.  She couldn’t imagine that that was something not everyone could do.   So I advise people to note the kinds of things that other people often ask them for help with, and that people compliment them on.  They will probably be able to discover some talents and abilities they have that not everyone has, and that could be an important part of figuring out what kind of business to get into, or how to make that business special.

    • @MatthewO Thanks, Matthew. I love that additional suggestion and have seen that in my own life as my knowledge of the personal finance topics progresses. It somewhat relates to the ideas of being in tune with your audience: getting feedback is so important.

  2. PT, great post. I’m also still looking for ways to manage my business vs being in the day to day of it. I think it means being more strategic than tactical. My wife told me last week that I’m spending way too much time doing all the work and need to find ways to teach others to do it so I can concentrate on more strategic opportunities that will grow the business. Smart thinking. I think I need to find a way to hire her. :)

  3. boomerangbuck says:

    Thank you for this post!  I especially appreciated point 3 and 5.  I hope to learn from this information and put it into practice.  Thanks again!

  4. This is a great post. I was guilty of #4 when I first started out.  I thought that blogging was going to be all about money and I have come to realize that it’s actually about growing my writing craft, the money is just an added bonus.  Have a great weekend Phil.