5 Scary Small Business Mistakes
Small business owners are almost guaranteed to make some mistakes starting out, but some are easier to recover from than others. Some mistakes can have downright terrifying consequences, including the failure of what otherwise might have been a viable business. If you’re considering starting a business or have already done so, make sure these mistakes aren’t waiting to jump out and scare you down the line.
Failure to Understand Employment Law
Whether you have one employee, a dozen, or fifty, there are employment laws which apply to you. It’s critical for an owner with even one employee to understand minimum wage laws, tax withholding requirements, federal family and military leave policies, overtime laws, disability laws, health insurance requirements, and more. Lots of businesses find themselves dead in the water when an ex-employee decides to hold them accountable for not following these laws. Make sure you know the law and follow it.
Ignoring the Fine Print
Opening a line of credit for your business, or taking out a loan, is an exciting opportunity to get immediate capital. However, if you don’t explicitly understand the terms of the agreement with your lender, disaster can follow. Some agreements offer the lender the option to change the terms of your payment agreement depending on your overall credit, even if your payments to them are current. Others allow for increases in interest rate after a fixed time period, or enable the lender to hold you accountable for the full amount if it isn’t paid back by a certain date. Don’t be afraid to ask questions before signing an agreement.
Expecting Employees to Act Like Friends
If your team is small, there’s probably a natural feeling of family that emerges over time. But that doesn’t mean you should always treat employees and team members like family. In many scenarios, it’s more important that you strap on your professional boots and put your comradery aside. Before any personal relationships comes the business arrangement, so you don’t want to be caught in a situation where you are being taken advantage of, or taking advantage of someone else.
Lack of Training for New Hires
Whatever role your new hire is filling at your company, proper training is important to establishing a good work ethic and process moving forward. If someone it’s trained properly, it can lead to problems down the road. It might mean you lose customers because the new employee doesn’t have a keen grasp of customer service or doesn’t know how to effectively process an order or complete a project. It might also mean the employee themselves leaves the company because they don’t feel adequate to their daily tasks. It could even open up the business to legal liability if they don’t understand laws established by entities like OSHA or the health department.
You might think you can keep an adequate understanding of your cash flow or available funds in your head most of the time and only balance your books once a month, and it’s possible you might be able to. But in the one case something gets forgotten or overlooked, lax bookkeeping practices could mean the end of a business. Whether it’s an unexpected tax audit or just a miscalculation in cash flow, no business owner wants to be playing catch up when it comes to the finances. Take the time to enter transactions and payments as soon as they occur. With today’s many mobile-friendly bookkeeping software options, there’s really no reason not to keep your books up to date all the time.
These are just some of the mistakes which can lead to the failure of a business, but they’re certainly ones which are easy to avoid. Don’t forget you can always rely on your Alpha Kappa Psi network for advice and guidance, even if you’ve already made one of these mistakes.