Seven Deadly Sins Or What Every Business Owner Should NOT Do
Even for well-managed companies, it is hard to run a profitable business in these difficult economic times. Add to that the challenges of operating a successful business in today’s economic climate, which has been the most severe since the Great Depression. Equifax Inc. reports that the number of commercial bankruptcies among the nation’s 25 million small businesses has increased by 44% between the third quarter 2008 and the third quarter 2009. What can a business owner do to avoid these seven deadly sins? These SEVEN DEADLY SINS MUST BE ABSOLVED!
1. Cash flow.
Cash flow projections are too difficult to prepare and understand. I don’t have time or money to generate one regularly. This would be my worst sin. Too many business owners are so focused on cutting costs or increasing sales that they forget to look after their cash. They find that they are unable to pay their suppliers or make payroll before they realize what has happened. The business grinds to a halt until the problem is solved. If it isn’t, it may become another bankruptcy statistic.
2. Banking Relationships.
Bank relationships are crucial in good and bad times. Bankers should be considered a partner and not an enemy of your business. Everyone will knock on your door to offer banking services when times are good. It is important that your banker understands your business and you as a person when you most need them. A part of this relationship is to ensure that you have a line of credit available to meet your cash needs. You are not in a position where you can go to your banker if your business is in danger. A sinking ship is not something anyone will invest in.
The financial statements are not the greatest asset of any company. Employees are the greatest asset of any company. If you treat them well and offer financial incentives, you will get the highest return on your investment (ROI). They can help increase sales, productivity, decrease expenses, promote the company, and market it. A bad employee, on the other hand, can quickly bring down a company.
4. Processes and Controls.
You must have adequate internal controls in place to safeguard your assets, especially cash controls. Many owners of small and medium-sized businesses are too focused on expanding their business that they forget to protect what they have. Trusting your employees is important, but don’t forget that there will always be hidden worms in the apple. A 2008 study by the Association of Certified Fraud Examiners found that occupational fraud is most common in small businesses. Organizations with less than 100 employees suffered a median loss of $200,000. Spend the money to hire an expert to help you implement policies and procedures that segregate duties and have checks, balances and checks. It’s an insurance premium, which will earn royalties.
You should spend the time and resources necessary to understand your customers’ needs and concerns. In years past, there was less competition in the marketplace for products and services. Because there were few alternatives, customers were forced to accept lower quality services. Even though small businesses have greater markets today, and are more globally connected, the competition between service providers is fiercer. Your only way to retain and grow your customer base is by providing a product/service that addresses their needs. It is essential to understand your customers and adapt your business accordingly.
6. Financial Statements.
Many small- and medium-sized business owners started their businesses because they are knowledgeable about their product or services. They don’t spend enough time understanding the financial aspects of their business. Each business owner should be able read and understand basic financial statements. These reports are the driving force behind a business’s success. It is important to ensure that these reports are delivered on time, that they are accurate and that you can easily analyze and process the information.
“I am more qualified to perform the majority of jobs in my company.” OR “I don’t have the budget to hire someone to handle administrative tasks, so I do them myself.” It’s impossible to do everything. Administrative tasks are the fastest way for business owners to get their business off the ground. Spending too much time on admin tasks will result in less time being spent on developing strategies and growing the business. The administrators should handle the admin tasks. This will be the most money you have ever spent.
Each business is unique and has its own style. However, any of these seven sins can have a devastating effect on the company’s future. Avoid the sins by practicing religion.