1. The 10 Most Common Mistakes Small Business
Owners Make
The American Dream - starting and operating your own business. I don't know of
anyone that has not at one time or another thought about starting their own
business. Being one’s own boss, setting your own work hours and being responsible
for your own destiny draws many people to start their own business. Once the
business is started is when one finds out how unprepared they really are.
These mistakes are not listed in any order. They were what I have found when
consulting with small business owners.
1. How to Read Financial Statements
I have interviewed over 50 small business owners and 49 of them stated that they
lacked the knowledge to be able to read and comprehend their financial
statements. When asked what they look at on a Profit and Loss Statement most
small business owners stated that they look three things: Total Revenue, Total
Expenses and Net Profit. However, they don't have a clue as to where these
numbers come from in their accounting software. Small Business Owners should be
looking at the size of their accounts receivables. Why? The Accounts Receivables
(AR) have a direct impact on your cash flow. You should run an aging report on
your AR and work on keeping your aging report under 60 days. The end result will
be more cash in the bank ultimately helping to eliminate cash flow problems. (In
theory that is)
Cash Flow Statement is King and most small business owners struggle keeping
enough cash into the business to keep the business operating while they wait for
clients to pay them. That is why working capital plays such an important part in
your business. It is better to keep your AR current as the longer the accounts
receivable is past due the less likely you will be in collecting them and the more
likely they customers will end up on your bad debts account.
The one thing that I have noticed is that accountants do not counsel and train
their clients. They really need to spend time helping their clients understand their
financial statements and how they relate to their business. I have seen a lot of

2. accountants get fired for failing to do so. So if your accountant is not helping you
understand your financial statements then you need to consider to firing your
accountant and finding one that will coach, teach and train you.
2. Working in Your Business Instead of Working On
Your Business.
A typical small business owner will be the one to meet with the clients, perform the
work and if time work on other aspects of the business. He or she is so
overwhelmed with all the tasks that need to get done that they forget why they
started the business in the first place. This is very difficult but crucial step that
needs to happen once the business hires a few employees. The Owner needs
delegate to his employees the actual work that needs to be performed. However,
before he or she does so they need to have a system in place to be able to evaluate
the employees’ performance to ensure that they are performing the work to your
standards. This is a critical step that needs to happen and I have heard all the
excuses in the books. Once the small business owner has delegated some of his
responsibilities it opens the doors for the owner to work on a three-year growth
plan, marketing plan and getting more customers.
I had been working with a small business owner for years and could not get him to
understand that he needed to dress the part of business owner and not that of an
employee. I got him into a class to develop a three-year growth plan and the
classmates did for him what I could not do. They got him out of his work shirt and
got him into a dress shirt. He later told me that he finally understood what I was
talking about.
3. No Defined Goals
It is imperative for small business owners to set effective and attainable goals for
their organization. Without goals your business will go nowhere. As a small
business owner you need to not only establish the goals but you must follow
through to put in plan in place to achieve the goals. You will want to also set a time
frame for each goal so that you do not lose your focus. There is no point in
creating goal that has no end date. A goal with a time frame helps you stay on
track.

3. Small Business Owners will also want to have milestones for each goal. What’s
important is to create milestones that will help you move in the right direction and
ultimately see you achieving your business goals in the long-term.
Don't forget to track and analysis your goals so that you can see when you’re not
getting the results you’re after. You may have to readjust your goals to fit your
current plan. don't be discouraged if you have to delay a goal there may be other
goals that you can accomplish sooner that will make up for the goals you had to
delay.
4. No Employee Accountability
In order to achieve success in your organization you need to hold employees
accountable for job performance and goal achievement otherwise you are guilty of
mismanage employees. Managing employee performance and how work is done is a
key to your organization's success.
High performing organizations entrust their employees to take
ownership, cultivate accountability and create high levels of trust between all
levels within the organization.
So what is ownership? Ownership is taking the initiative and doing what's right for
the business. It is about taking responsibility for the results and not passing off
those responsibilities to others within the organization.
5. Understanding Your Customers
In order to fully understand you need to take the time to ask the right
questions. What problems are your customers trying to solve? What questions do
they have? How are your customer’s questions changing and evolving? Once you
have the answers to these questions and others then you can help them by
providing the solutions to these issues. Too often I see small businesses going to
potential clients and telling them what they can do for them without understanding
the problems that they are facing. A little homework up front and turn a potential
customer into client for life. By the way, this is something that you don't just do
once but on a continual basis as customers’ needs change and evolve and along with
that their problems will also change.

4. 6. Lack of Communication
In my mind you can never communication too much. Communication is the key to a
well-run business. I can tell you from experience that a lack of communication can
and will ruin high performing teams, and employees. If employees don't know what
is expected and how they are to manage their job responsibilities your business will
fall apart. It will have a direct impact on not only on your employees but also your
customers.
7. Unclear Plan
The first step in starting your business is developing a vision and mission
statement. So what is a vision statement? A vision statement defines the core
ideas that give the business its direction. A vision statement can be used to guide
to motivate employees. Whereas a mission statement defines the company’s
culture, goals, ethics, and a standard for decision-making.
8. Not Anticipating Changes in the Markets
I have seen a number of small business not foresee changes in the market which
resulted in them either going out of business or affected their business badly. For
example, in 2008 when the recession hit I watched a number of small business go
bankrupt. Why? Simply they did not anticipate the recession. Small Business
owners got used to having sizable funds in their business accounts so they
withdrew the money and spent it on new homes, new cars or trucks, ATV and
RTV. Small business owners went into debt because they thought they had plenty
of work and everything seemed fine. What they should have done is to save the
money so that they could still operate during the recession.
Another thing I have watched is companies get complacent with one or two revenue
streams and don't diversify. It is best to build the company up to a minimum of
seven (7) revenue streams so that if something happens with one stream it does
not destroy your business.
9. Get Rich Quick

5. I cannot tell you the number of businesses that walk through the door and want to
get a large contract with a customer. It is better to build your business up slowly
then try to land one large contract when you do not have any past performance. A
client may not hire you if you have never worked with any other clients. They don't
want to take the risk yet small business owners think one large client and they have
it made.
Many small business owners will give up on their dreams because they fail to
remember that success takes time, perseverance and a little bit of luck.
10. Failing to Develop a Three Year Growth Plan
Most small business owners are so overwhelmed in the day-to-day management of
their businesses that they fail to take the time to develop a growth
strategy. Imagine if you discovered ways to increase your revenues by 30% or
lower your expenses by 15%. What impact would that have on your business? By
taking the time to implement a three-year growth strategy could take your
business to the next level.
Avoiding these mistakes will not guarantee your success. However, it is essential
to understand how various choices you make will impact your business. Too many
times small business owners are consumed with working in their business that they
fail to take the time to work on their business. Using goals to achieve your
business success is the first start. I had a company that within a six (6) month
period was able to increase her revenues by 40% by setting achievable goals within
a specific time frame. I hope that you will take just one ideal from this blog post
and implement it in your business. I am sure you will see results.
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