Six biggest lessons learned by small businesses
By Milton Dellosier
As a banker, I’ve seen well-intentioned, capable small-business owners face some of the same challenges in a wide range of fields. To help you learn from their experiences, I’d like to share with you the six biggest lessons these business owners have revealed to us. Each of the six missteps are preventable, from strategic decision-making to everyday banking:
1. Going at it alone
Some entrepreneurs trust only themselves, a partner or a spouse when facing key decisions. However, it’s best to include at least three other people in your decision-making: an attorney, a CPA and a financial advisor or banker. This team of advisors should be dedicated to helping you succeed and communicating with each other to accomplish this goal. Without their specialized expertise, you may not have the experience you need to understand all your options and choose the right path.
2. Wearing all the hats
“If you want something done right, you have to do it yourself” may sometimes be true and, for a cash-strapped start-up, it’s certainly cheaper. But, as your business grows, it’s essential to get help. Responsibilities, such as bookkeeping, taxes and payroll, take up time you could spend serving your customers. Even more importantly, getting them wrong can be dangerous. Hiring a professional not only helps prevent errors, but shifts much of the risk to someone else.
3. Keeping your head down
Focus and dedication are watchwords for the successful entrepreneur. But business owners also need to make time to seek wisdom in the wider world. For example, some business owners may not be aware that there’s a fairly simple way to get their website ranked higher on Internet searches. If you are seeking wisdom every day, this is the kind of useful information you will find. Research and planning for the future can seem like secondary concerns, especially when you’re not sure where to go for information. Whether your quest for knowledge includes on-line research, trade shows, Chamber meetings or networking with peers, it’s a vital investment to make. Otherwise, you risk missing out on ways to improve your business, such as funding opportunities for small businesses or educational resources to help you tackle tomorrow’s challenges.
4. Running lean on cash
Small businesses need at least three months of cash flow in reserve to be ready for seasonal fluctuations or the inevitable dry spell. It is often difficult to do so, especially if you developed frugal habits when you were just getting started. Making a commitment to put cash away monthly can help, and so can a line of credit. Think of it as a sort of insurance policy: if you don’t make the investment, the results could be devastating.
5. Avoiding credit applications
This mistake is a close cousin to the one above. Minimizing your debt may be a good goal for your personal life, but most businesses will require some level of borrowing capacity at some point. Applying for credit before you actually need it, and making a point of tapping your credit regularly and repaying promptly, will help you build a solid credit history and a source of ready cash when you do need it. In many cases, if you wait until you actually need credit, it can be harder to get.
6. Combining accounts
Not separating business and personal accounts is a common error. It’s an easy one to make when you’re starting out and want to “keep it simple.” However, comingling your credit cards and bank accounts makes it nearly impossible to get a sense of your business cash flow. It’s even worse for doing your taxes, let alone justifying business expenses in case of an audit. Establishing dedicated business accounts lets you start building a credit history in the business’ name, which can make it easier to secure financing.
Do any of these sound familiar? To avoid these and other pitfalls, take a long look at the way you work, and make sure you are following business practices that will keep your business headed towards success.
Milton Dellossier is an assistant vice president and regional diverse segments manager for Wells Fargo. He relocated from Juarez, Mexico, to Arizona in 1999 to pursue a degree in business management from Arizona State University. He serves on the board of directors of the Arizona Hispanic Chamber of Commerce, the Arizona State University Hispanic Business Alumni, Community Housing Resources of Arizona, the Arizona Foreclosure Prevention Task Force and the Hispanic Women’s Corporation.