It is 27 years since I set up a business mailing list company from a corner of a flat in South London. I have tripped up many times, made some disastrous hires and failed again and again. Here are seven tips on avoiding common errors which bring down potentially great businesses over and over.
1. Sometimes the cheesiest old sayings are bang on.
The first sales manager I ever worked for would chant, almost daily, “An order is not an order until the cheque is in the bank”. Many small businesses fail because they allow their biggest clients to run up debts. Too afraid to get tough with the biggest client about unpaid invoices, they fear upsetting the client relationship. But when the client tips into administration, the fledgling business often fails too. I still don’t know the best way of preventing this other than to be upfront about money from the off. Set a credit limit and stick to it. Yes, you might lose orders, but that is better than doing work for which you ultimately are not paid.
2. The potential new client who calls the office and begins with “I am going to place a big order. What discount can you give me?” will never place a big order.
In fact, this person may get you running round doing all sorts of favours for free, dangling the carrot of the “Big Order” and finish up placing a tiny order. Often he (and I’m afraid it is usually a he) disappears from your inbox right at the point you thought you had him pinned down to sign off the purchase order. Ignore these boasters and wheeler-dealers. Be firm with time wasters and focus on clients who have already placed orders and paid for them.
3. Cheesy old saying #2 “A penny saved is a penny earned”.
When you are working for a big company, you can rifle through the stationery catalogue, ordering what you fancy: neon post-its, fluffy staplers and coloured pens for future unspecified projects. When you start up a business, every time you whip out your corporate credit card, you are spending Your Profits. Before you order up corporate stationery and embossed business cards, pull in some business and line up some clients.
4. Are you ready to work? Or in love with the heady idea of being an entrepreneur?
Setting up a business is beyond exciting. Allow yourself to dream and dream big BUT you must get down to the nitty gritty of hard work and actually complete jobs for customers. It is only by talking to customers and seeing what people will pay for that you will refine your business proposition and figure out what works. Some businesses fail because the leadership cannot see that the business, as they imagined it, will not be profitable. Keep your eye on your profit margins and be prepared to tweak your business offering.
5. Promote Your Business For Free Where Possible.
There are so many ways to promote your business for free on the Internet. Even if you do not yet have a website, build your web presence on Twitter, LinkedIn (good for b2b), Facebook (good for consumer marketing), GooglePlus (good for SEO), Pinterest and Instagram (if your product is photogenic). Do not be shy about reaching out to people on social media. Keep your personal social media accounts separate from your business profiles. You probably want your business social media profiles set to Public and Available To All.
6. Keep Good Accounts.
It is an obvious one but so many businesses go the wall over slack accounting. If you don’t keep clear accounts, how can you tell if you are making a profit? Yes I know, you find it dull and you never did master calculus at school. But save yourself a major tax headache by keeping accurate records of everything you earn, everything you spend and the profits you are generating. And if you cannot bear to master basic tax and accounting, do not begrudge hiring an accountant who specialises in small businesses.
7. Do Not Hire Your Friends.
Whether you need an accountant, a software guy or a web designer, try not to hire a friend. By all means get a recommendation from a friend but do not hire your actual friend. It is awkward to tell your friend that you hate their design for your website or that they really need to hurry up and finish your annual accounts. Take a deep breath, hire someone you don’t know and if it does not work out, fire them. Firing a friend is beyond awkward and obviously you’ll lose a mate.