As one looks to enter the world of entrepreneurship or expand their current business, the question is the same….What are some common mistakes or things we can avoid. Here are a few of them:
Cash is King!
Not having a large enough cash reserve in the beginning or in the growth stage of a business can be dangerous. A common sentiment in the beginning is, “If I can just get my doors open, everything will be fine.” This is a dangerous thought process for the survival of the business as there will ALWAYS be unforeseen expenses and additional costs. When a business is in growth mode there may be a greater need for cash than when the business started. As the business prepares for growth there will be a need to ramp up the resources of the business such as purchasing more inventory or equipment, hiring employees, or moving to a bigger location.
The next question asked is, “How does one know when it is enough?” One way to help determine this is to develop a cash flow projection or forecast for your business.
Don’t get caught with your hand in the cookie jar.
Don’t use the business account as a second personal checking account or savings account. There are certain expenses that a business owner can expense through the business but discretion should be used when paying out bonuses or disbursing the profit among the owners. Remember, cash is king, and if the business owner takes all the cash out there is nothing left to support the growth or survival of the business.
One recommendation would be to contact your CPA or accountant and discuss what is appropriate to take out of the business.
How do we do that?
Systems and Processes are key to growing your business. The reason franchises are enticing for entrepreneurs is they have spent the time writing down all steps required to conduct business. The manuals they provide usually are very detailed and start with unlocking the door and continue this process until the business is closed for the night. A written process that is simple to follow is a key component for a business to grow. The written plan is always available to the employee even if their supervisor or manager isn’t.
One recommendation would be to sit down with your team and ask them to walk you through each step of their jobs to help develop the plan.
Can you take a vacation?
If you wanted to take a 5-7 day vacation where you would have limited access to phone and email, could you? Would your business survive? If the answer is no, then there may be a problem. One of the key characteristics of businesses that generate revenues in excess of one million dollars is the ability to delegate. Relinquishing control as an owner can be difficult, but can you afford not to?
One recommendation would be to identify the strengths of oneself as the business owner and also those of the team. Once strengths have been identified, match those up with job task.
(Source: Todd Carlisle, Consultant, UGA SBDC in Columbus)