The 10 Biggest Mistakes Made by Small Business Owners (and Large Ones Too!)
“It’s not the will to win that matters - everyone has that. It’s the will to prepare that matters.”
Bear Bryant, Legendary Football Coach
10. TRYING TO GET RICH QUICK
9. ASSUMING YOU HAVE NO COMPETITION
8. LACK OF LEADERSHIP
7. ALL BUSINESS ALL THE TIME
6. HAVING UNREALISTIC FINANICAL GOALS
5. NO CLEAR PURPOSE OR "RALLYING POINT"
4. CUTTING PRICES
3. NO CLEAR MARKETING STRATEGY
2. NOT BEING FORTHRIGHT
1. TRYING TO DO IT ALL
Please don't! Call someone! It will save you money, undue stress and most of all time!
Written by Peg Brakern, reprinted from Maner Costerisan CPAs.
Business Start-Up Checklist
Use this 1-page business start-up checklist to guide you through some of the most important steps you need to consider while in the planning phase of your business. Although this list is by no means comprehensive, and not all of the steps apply to every type of business, it's any easy, simple way to make sure you aren't overlooking the obvious. Review it as early as possible in your start-up process to be sure you understand how much work goes into starting a business the right way!. Click here to see the checklist.
Guide to Starting and Operating a Small Business
This is booklet was put together by the Michigan Small Business and Technology Center (MiSBTDC) and the Michigan Economic Development Corp (MEDC). It will walk you through the steps you’ll need to take before starting your business, beginning with a short self-assessment to make sure you’re cut out for business ownership. It also includes an easy to understand checklist and lots of “how tos”. This is a good primer for anyone considering a start-up, or anyone already in business who wants to make sure they have everything in place. To see the Guide to Starting and Operating a Small Business click here
Financing Your Small Business: How to Borrow Money from People You Know
This booklet is a great tool to help you determine who to approach for money, and the different types of loans to consider. It also includes worksheets, information on how to put together a strong loan proposal, and sample payment schedules. To access How to Borrow Money from People You Know click here
Before You Visit the Bank - Advice From a Small Business Loan Officer
In this video, Community Shores Bank Vice President John Clark talks about what every entrepreneur should know before going to the bank to apply for a loan. Click here
to watch the video.
Determining Your Salary
In this 1-page article written by Mike Michalowicz, author of "The Toilet Paper Entrepreneur", you'll learn one expert's guidelines for setting your salary as the owner of your small business. Click here to read Mike's article.
Tips for Managing the Money People Owe You
"Why is there so much month left at the end of the money?'
John Barrymore, Actor
Remember, more businesses close their doors due to poor collection practices than lack of sales or revenue.
Excellence in receivables management is both an art and a science.
When an invoice becomes overdue, the chances of collecting it in full go down with each passing week.
Tips for managing your system from the inside out:
Track your A/R with software; it makes it much more cost effective.
Record sales as soon as possible. The quicker you bill, the more timely you get paid.
Establish credit policies up front. Ask for references before extending credit to determine customers' ability to pay.
Offer alternative payment methods. If you do not currently accept credit cards or PayPal, look into it. Sometimes these are cheaper than the administrative costs associated with trying to collect the "uncollectible".
Offer discounts for early payment. Who doesn't like a deal?
Review your accounts regularly.
When dealing with delinquent accounts, remember that the squeaky wheel gets the grease! You don't have to be rude, but you do have to be firm. Offer a payment plan on the outstanding balance, and provide new products or services with cash on delivery only.
If collection becomes too labor intensive, consider using a collection agency to do it for you.
Written by Peg Brakern, reprinted from Maner Costerisan CPAs.
Tips for Managing Expenses
"We didn't actually overspend our budget. The allocation simply fell short of our expenditure."
Keith Davis, Motivational Speaker
A good way to improve your cash flow is to minimize your business' operational expenses.
Consider the 9-9-9 plan for your business:
9% of your revenue should be spent on sales and marketing promotion.
Allow 9% of revenue for fixed overhead and no more. High overhead is a killer!
Reserve 9% of sales for retained earnings (cash) or investments.
Important options for reducing those "must have" expenses:
Service contracts - don't buy them on reliable stuff!
Cooperative advertising can be a big win-win.
Stop the weekly payroll - who's the boss?
Outside payroll processing - less headache for you, and cheap too!
Outside bookkeeping services - if doing the books is too much or doesn't make sense for you, then ask your accountant to help you find someone to hire who is properly suited for the job.
Written by Peg Brakern, reprinted from Maner Costerisan CPAs.
Creating the Perfect Business Pitch
Anyone who is starting a business or already has a business should have a well-practiced "elevator pitch" prepared. An elevator pitch is a concise, carefully planned description of a business idea or current business. The pitch should be delivered using language a 4th-grader could understand in the time it takes to ride up an elevator - usually 90 seconds! It's important to have your pitch ready to go anytime, anywhere, because you never know when you'll have an opportunity to talk to a potential investor or future customer.
Click here to read an article that will teach you how to develop a pitch that's right on. It also includes a link to an online pitch-builder tool from Harvard Business School - also very helpful and easy to follow. To go straight to Harvard's Elevator Pitch Builder, click here.
What Venture Capitalists Want to Hear - Pitching Your Business Idea Effectively
By Dale Grogan, Managing Director, Michigan Accelerator Fund
I am a venture capitalist. My job is to make money for my investors by backing good people and good ideas. I use our investors’ money to invest into companies with the expectation that we, along with the company owners and founders, will make more money than we invest. So I have certain expectations. Understanding the expectations of the venture capitalist can make the difference between getting the funding that is much needed, or getting a “Good luck, and goodbye.”
Sometimes there is a disconnect between entrepreneurs and venture capital investors. On one hand, the entrepreneurs say, “Those soulless vulture capitalists don’t really care about my business, they just want to make money.” On the other hand, the venture capitalists say, “We sure wish we could invest into companies where management understands what we want.” Both sides are correct. So here are a few insights that could help the entrepreneur formulate a better, more successful pitch:
So what would the best of all worlds be? Something along the lines of, “The last business we sold for a 10X profit in four years. We have the same team put together and this time we have developed a new product that addresses the problem in the market heretofore inaccessible. We have our first client committed, along with non-dilutive grants.” Perfect - sign me up. However, it is a rare occurrence for an entrepreneur to be perfectly prepared in every way every investor wants. The truth is that no company will have every box checked - the real world does not work that way. So understanding this, the investor really wants to have confidence that the entrepreneur is smart, dedicated and motivated. And together we can build a great company and make money. Now that’s a true win:win.
I want to understand your business, but I don’t need the complete history of your industry. For example, if you have a new gas mask, then describe that rather than giving an epidemiology lesson on how disease is spread. Products typically fall into one of two categories: they are either a better mousetrap, or they solve a previously un-solvable problem. For crying out loud, tell me what problem you are fixing! And that answer can be very simple (in fact, you should be able to describe your entire business in one sentence). “We have a newly patented product that uses custom designed nano-particles to detect toxins in the air in real-time, saving the government time, money, and lives.” (This happens to be a real example).
The number one thing I care about is the management team. Your product and service is secondary at this point. In the early stages of a company’s growth, it is the vision, ability and drive of the management that carries the day. If you have done this before, that is a huge plus. Or, if you were instrumental in building a company, that is something that investors really appreciate. The take-home lesson here is that investors bet on the jockey, not the horse. So if the entrepreneur (and the entire team) has proven successes in related industries, those inspire investor confidence. One-man shows get very little attention. And a key person to have in place very early on is the lead sales person. Of course, this can be the founder, but too often tech companies load their staffs with a surfeit of academes with very little business experience and even less sales experience. Despite the comment that “Our product sells itself,” (which has never happened), someone on the team has to have the ability to sell. I mean someone who can hard sell, around-the-kitchen-table sell. Timeshare sell. A closer. Without sales, the world’s best idea is just that - an idea.
Convince me you know how to sell your product into your market. As the owner of the business, it is entrepreneur’s responsibility to articulate a clear sales strategy. How you sell your product is at least as important as to whom you are going to sell your product. And don’t give me Chinese math: “If every person in China buys just one of our product, we’ll all be rich!” The more tightly you can define your market, the better. There is something called the Total Addressable Market (TAM), which is the value of the entire market for your particular product. More important is the Total Reachable Market - that is, the size market that your company can realistically reach. Don’t bother including the Brazilian bikini wax market in your TAM if you have no plans to sell to Brazil or offer bikini waxes.
Explain that you understand the financial implications of investment. This is a big one. If I invest into a company, I want to know that you understand finance. Specifically, I want to be confident that you know the difference between a spreadsheet and a bed sheet. So as you explain your revenue projections, a bottom-up build is better than a top-down extrapolation. In the former, you can demonstrate that your projections are based on unit sales from a realistic, previously defined pipeline. The top-down approach is where you create the top-line revenues (to create a typical hockey stick chart) and fit the expenses to fit the revenues. Generally, venture investors will drill down until the numbers get proven or disproven. And if the numbers are not credible, the rest of the discussion is cast into suspicion. So be realistic in the projections such that they are defensible. It is possible that realistic projections reveal that the potential returns are not enough to warrant venture investment (a 5x to 10X return over five years). That’s fine. It’s better to know that on the front side rather than after investing a bunch of time pitching VC funds only to hear later, “Great idea, but not enough upside for us to invest.” Next, I want you to be as frugal with my money as I am. Don’t go telling me that you are going to “scale up in anticipation of revenues” and don’t even think of saying “Once we get your money, we will be able to test out some of our ideas.” Investors want to know what you have been able to do with your own resources. In other words, prove your resourcefulness - that gives comfort to investors. Lastly, never, ever, ever say that you expect to be paid out of investor funds for sweat equity. Your investment, sweat or otherwise, must be aligned exactly as all other investors, which is the big payout at the end of the deal.
Other Great Sites for Entrepreneurs
This site combines breaking news with stories with an entrepreneurial slant. You’ll also find special reports like “Secrets of Serial Entrepreneurship”. Another great tool is “Self Assessment: Measure Your Entrepreneurial Instinct”, which is a 31-question questionnaire.
The Harvard Business School Entrepreneurs site contains a video archive that captures insights from leading members of the school’s entrepreneurial community. The members speak on a common set of themes including their development as entrepreneurs, strategies for identifying opportunity, and leadership.
This is the website of the Indus Entrepreneurs (TiE), a group that was founded in 1992 in Silicon Valley by successful entrepreneurs, corporate executives and senior professionals with roots in the Indus region. There are currently 13,000 members, including over 2,500 charter members in 56 chapters across 13 countries. TiE’s mission is to foster entrepreneurship globally through mentoring, networking, and education. Dedicated to the cycle of wealth creation and giving back to the community, TiE’s focus is on generating and nurturing the next generation of entrepreneurs.
Aol Small Business boasts a board of directors who comment on questions of the day. You’ll also find news and articles that tell you “5 Things You Need to Know”. The site also includes a tip of the day, videos and forums.
This site is the home of the Kauffman Foundation, the world's largest foundation devoted to entrepreneurship. The site contains news, blogs, and other interesting reading plus a small selection of videos from CEO and president Carl Schramm and several of his VPs.
This is a website for entrepreneurs from all walks of life. You’ll get lots of advice like the best way to do this or that, three or four reasons to do something else, what to look for, and tips and tricks. You’ll also find a link to the current issue of the popular Entrepreneur magazine.
More a page than an entire web site, this section of LinkedIn helps entrepreneurs get their ideas off the ground.
This is the website of the Edward Lowe Foundation, a non-profit “think tank” that focuses on second-stage entrepreneurs. News, blogs and lots of articles on the most relevant topics for small business, such as defining your market, managing finances, HR, legal issues and taxes.