The Five Biggest Mistakes Small Businesses Make
The past six years have been difficult times for most businesses. However, while many businesses have been forced to shut their doors, others have not only survived, but have succeeded. Over the past six years, we have seen a common thread among the businesses that have not succeeded.
The purposes of this Special Report is to identify some of those common mistakes we have seen to help you avoid the same pitfalls of these businesses. If you have not made any of these negative decisions discussed below, then you are hopefully continuing your path to success. However, if you have made some of these decisions, or fear having to make these decisions in the near future, please read this Report carefully, and feel free to contact us to discuss your options to avoid these potential issues in your business.
1. Waiting too Long to Reduce Labor Costs: As a small business owner myself, I know the difficulties a business owner faces in having to make the decision of letting a person go, especially if that person is a good employee. There is always the hope that “next month will be better”, and that if you cut somewhere else or if you do not take a salary for a month, you will be able to keep that person on long enough for the business to turnaround. While it may be an extremely difficult decision to make, you must keep in mind that if you keep employees on your payroll that are not supported by your business income, you jeopardize the jobs of all of your employees as well as yourself.
2. Not Realistically Budgeting for Future Fixed Expenses: Proper budget planning goes hand in hand with the staffing issues discussed above. So often we will meet with a business owner who just looks at the income stream and has not realistically budgeted their actual expenses. It is crucial that at the beginning of each year, whether it is January 1 or the beginning of your fiscal year, that you make a realistic budget listing all of your expenses, to determine how much you will need to bring in order to not only cover those expenses, but also to have a reasonable profit.
3. Borrowing form Personal Assets to Help your Business Survive: Under Florida law, your homestead is protected from creditors. Therefore, if you have equity in your home that you subsequently took out a second mortgage on in order to inject money into your business, you have now taken a personal asset that was protected from creditors of your business and created a secured lien for the bank that you borrowed the money from to pay off debts. As a result, you turned an unsecured debt of the business into a debt secured by your own personal assets. Not a wise move in this or any economy.
4. Failure to Communicate with Business Partners to Avoid Making Difficult Business Decisions: Having a business partnership with other individuals is no different than a family dynamic or even a sports team dynamic. It is very easy to get along when everybody is making money and everyone is happy. However, when we face a challenging economy as we do now, it becomes a true test of business partners to get through these difficult times. Just as when there may be a squabble between family members when individuals do not talk for days, weeks, months, and sometimes years, or the dissension that you see among a football team that was a cohesive unit while winning and then hits a losing streak with anonymous players complaining to the press, the same occurs in a business environment. However, just as lack of communication can devastate a family or sports team, it can just as dramatically devastate a business.
5. Relying on “Hope” As A Marketing Strategy: Cutting your marking budget in down times again, in my opinion, is the worst place to cut. The real issue you must address is whether your marketing is working. You must make a determination as to what is your return on investment for your advertising. If you cannot measure your ROI for each piece of advertising, then you are wasting your money in that area. Every place you advertise should be measurable. The best example I can suggest that you look at as far as your web page is concerned would be Google Analytics. This can provide you with a detailed analysis of items such as how long people are staying at your website, what pages they are visiting and, what page they are exiting from. Obviously, if you are selling a product online, you want to see people leaving from your checkout page. You should do the same type of analysis for each format of advertising you are using to determine whether or not they are effective. Rather than cutting your advertising budget, you need to spend it more wisely in targeted areas with measurable results.
Contact a Port Charlotte Business Law Attorney
If you have a situation as we described in this article and have questions or concerns, please do not hesitate to contact us to answer your business law questions.
Unfortunately, the majority of the time, clients come to see us after they have a legal problem. In the business environment, often problems could have been avoided if the parties had met with an attorney prior to entering into a contract or a business partnership by having a complete understanding of the terms of their relationship in writing before moving forward with the transaction.
Without such a writing, the parties expose themselves to having a judge try to make a determination of what the parties intended at the time they entered the agreement which ultimately will result in one side disliking the results. They way to avoid such a scenario is to have well drafted documents which clearly set forth the understandings of the parties.
Whether you are starting a new business or have a long established one, legal issues must be addressed on a regular basis. From deciding what type of business entity you should create to drafting a shareholders agreement, we can help you in deciding what best fits your needs for your business goals. We can also assist you when you have the difficult customer who has not paid you or if you have been sued by a disgruntled client.