Are you making management mistakes that could hurt your business? Whether it’s disgruntled employees, a lack of customers, or poor cash flow, there are many things that can threaten the success of your business. Here are the top critical small business management mistakes to watch out for.
Running a small business is complicated and difficult, and too many companies waste valuable opportunities because they keep repeating the same preventable mistakes. SBA statistics on business bankruptcy shows that about one-third of new employers do not survive more than 2 years, and by year 5, just over half fail. However, many of these failures are preventable.
While everyone does bad management decisions At one time or another, here are some of the most common mistakes that can seriously derail small business efforts.
Ignoring sales and marketing
Startups and small businesses tend to operate in boom or bust cycles. When they are busy, sales and marketing efforts are neglected in favor of production tasks. Even the salesmen rush to help, and it’s hard work development of new products and customer outreach is neglected. When the good times fade, the company begins to struggle for orders without any additional revenue lines waiting to pick up the slack. As a small business owner, you need to make sure that your relationship building efforts remain solid no matter what the prevailing business climate may be. Customers expect frequent updates and information about new products and industry developments. If you are unavailable, a competitor will be more than happy to fill the void.
Being averse to change
Success in business is achieved with difficulty. Once you’ve figured out what products or services are profitable to sell and what methods work best for your business, it’s only natural to want to keep doing the same. But this is not always appropriate. What customers want or need to buy can change from year to year. How and where customers shop may change. What you need to do to hire and retain good employees may change, as will the technology to effectively run your business. To stay competitive and grow your business, your business may need to change.
A common characteristic of many small business owners and managers is desire micromanaging your employees. It comes from a deep sense of connection to the business and a belief that no one else cares enough to get the job done the right way. In addition to inhibiting the employee’s potential, the manager ends up with such a heavy workload that it is impossible to be fully effective at any particular task. The effects of micromanagement negatively impact performance, ability, engagement, and progress. Fight the urge to meddle and let your employees reach their full potential.
Failure to understand finances
Most small businesses are looking to grow, and owners and sales managers want to take advantage of every new sales opportunity that comes along. But taking advantage of these opportunities and growing a business often requires money. If the business does not have sufficient cash flow or retained earnings, the financing must come from a loan or investment of funds from the owner or an outside investor. While owners may be well versed in the operational aspects of a particular industry or trade, many lack a basic understanding of the income statement, balance sheet, and cash flow analysis. Spending decisions made without a clear understanding of the financial implications can be devastating. While keeping a close eye on sales and profits is important, understanding cash flow trends should always be your primary focus.
If, after careful consideration, an extension appears warranted, it is essential to carefully study and review the proposal to determine feasibility. If the project gets the green light, make sure the right people are in place to execute the initiative in a timely, cost-effective and profitable manner.
Lack of responsibility
Accountability is a difficult concept for many small business owners to understand and properly practice, especially for those with no prior management experience. Disagreements and resentments arise when expectations are not met and support is insufficient. Before addressing a performance issue, it’s important to ensure that a team member has all the tools and training they need to successfully complete the tasks included in their job description. You must set achievable and specific goals. If the standard is clearly established, employees who consistently fail to meet it should be asked to leave.
Refusal of delegation
Closely related to micromanagement, the failure to delegate properly is the cause of a variety of insecurity factors, including lack of trust in subordinates, fear of creating a perception of laziness, and risk aversion. Effective delegation can benefit the employee, the organization, and the manager by providing higher quality work and boosting employee morale. If the delegation is done properlythe manager has additional time to attend to more important business functions such as sales, marketing and future planning.
Manifestation of a negative attitude
It’s only natural to worry when business seems to be slowing down or when your company is struggling financially. But don’t let your worries cast a negative shadow over your employees. Showing negative emotions creates fear and anxiety, so it’s important to show confidence and help build a team environment. Make sure the team dynamic is such that your team members are comfortable giving you suggestions for changes based on their experience with clients or their job performance.
Lack of sufficient planning
Small businesses often grow organically and tend to deal with difficult situations as they arise. This often creates a culture of crisis management that causes stress for owners, managers and employees. Creating specific short-term and long-term plans will help your business move in a positive direction and avoid the many pitfalls you might encounter. Several important areas require interim and in-depth planning, as well as periodic review:
- Salary calculation
- Development of products and services
Learn from your mistakes
Admitting a mistake is not a sign of weakness. For employees, a boss becomes more human when she or he steps up and shows confidence in a mistake. This serves as a testament to the company’s commitment to integrity, learning and improvement. When responsibility is denied and blame is shifted, your staff will become less sincere and more cautious. Employees always perform better in an environment where they know that the occasional mistake is considered part of the learning process and that management encourages personal growth.
Every business will face some challenges as it tries to grow, but being proactive about the challenges you know might arise will help you better handle the unexpected. Always make sure you and your team know who is responsible for resolving issues, and communicate a clear escalation plan to your staff to ensure you can contain small issues before they become big problems.