The 7 mistakes people make that kill their business

As a business starts to grow, it’s crucial that your actions don’t strangle it in its infancy.

By avoiding the mistakes that so many business owners make you have a far greater chance of succeeding beyond the first 2 years.

Chantal Cooke from PASSION for the PLANET interviewed Hilary Briggs, a management consultant with over 20 years of industrial experience having held senior management positions at Rover Group, Whirlpool Corporation and The Laird Group plc, where she was Managing Director of the Group’s German-based Car Body Sealing Division. Hilary is also chairman of the Central London group for the Academy for Chief Executives.

In her experience working with many business owners from a variety of sectors Hilary has identified seven key mistakes that business owners make again and again and that often lead to the death of their company;

1. Doing Too Much Yourselfr
Many business owners fall into this trap as they attempt to keep their costs to a minimum. But ultimately it can mean you get bogged down in day-to-day issues and fire-fighting. There’s less and less time to step back, plan for the future and anticipate problems – which then hit as the cycle goes round again.

On top of this guilt about the lack of time spent with the family can compound the issue and in extreme cases can lead to exhaustion and collapse.

Many business owners kid themselves that everything is OK and only start to hire staff or outsource when the cracks are beginning to show. By then it can already be too late.

2. You Don’t Know What You Don’t Know (i.e. A Lack Of Skills And/Or Knowledge)
Many businesses are founded because the owner is good at something and enjoys doing it, so they decide to set up a business providing this service to others. What they forget that is that a business also involves finding clients, marketing, recruiting and motivating staff and managing cash flow and as you grow you’ll also need to develop systems and procedures and perhaps even deal with internal politics.

Remember running and growing a business involves a many skills and it’s unlikely you’ll have the expertise in all the areas yourself. So learn to recognise where your skills and knowledge fall short and take action to remedy this gap in your business.

3. Growing Too Quickly Before Your Model Is Provenr
Typically the owner’s passion and belief in the business is very high, and sales come in. So, they gear up by expanding staff and premises – only to have to cut back as the sales increase turned out to be just a blip.

Every business needs working capital and as the business increases so does the working capital requirement. So if cash is tied up in stock or in covering debtors that owe money on standard 30 day terms, then the company runs the risk of running out of cash. This is a well recognised phenomenon and the Bank of England is expecting the business failure rate to increase as we come out of recession.

So make sure you plan for any expansion – often business owners fail to do this; they celebrate the increase in business and then blame the banks for pulling the plug just when things are picking up. The reality is you need to sit down with your Bank Manager and discuss the need for funding several months in advance to avoid any panic requests.

In addition if you don’t have the appropriate systems and procedures in place, you can end up being sucked into more and more areas as the business grows, meaning you spend more time working in the business and less time working on it.

4. You Haven’t Got Anyone To Bounce Ideas Off
Many new businesses are too small to have a proper Board or even a Non Executive Director. Some issues are not appropriate to talk to staff about and often partners and friends just don’t “get it”, and advisors may have only a narrow focus or worse still have their own agenda. So business owners end up in a silo on their own.

This can be very damaging. Talking things though with others is important as it may yield new perspectives, and just as valuable can be situations where people endorse your view reassuring you that you are on the right track. Likewise if the reactions and advice are mixed then perhaps it’s an indication that there’s more work to be done to understand the issue.

5. Bringing In The Wrong Peopler
It’s great if you’ve recognised and acted upon the need to bring in exte
al people, however, many business owners hire in their own image – so the gaps are not actually filled. It’s also common for the recruitment to be left until the last minute (to save costs) and so a rush decision is made, potential problems are overlooked, references are not checked, and business partners and shareholders are not consulted so they never really “buy in” to the new recruit. It’s easy to rely on friends and family – who may be good enough in the early stages – but in the longer term they can be a constraint, and a very tricky problem to deal with later on.

Remember, no matter how good someone is, if there’s a difference in values, then the only questions that matter are “When will the row happen?” and “On what subject will it be?”

If you are considering using a consultant/advisor/mentor it can be hard to choose the right one, so find out; how much real world experience do they have? Is it relevant to what you need? Are their skills and experience complimentary to yours? Do you have mutual respect? How important will you be to them? Do they know their own limits? What networks and contacts do they bring? Will they let you talk to their clients to get a feel of how they work? Make sure you are comfortable with all these areas before committing yourself.

6. Lack of self awareness
Many business owners refuse to face their fears and insecurities, often because they don’t want to appear stupid or expose a lack of knowledge. They don’t trust other people and want to hold on to everything themselves because they believe no one can do it as well as they can. They have a lack of awareness of their own personality, of their strengths and weaknesses, and their impact on others. Ultimately this means they are less able to build an appropriate team around them.

Many think they’re great delegators – but in reality they are just dumping or they’re micromanaging, so they don’t achieve any real engagement with their people. This then reinforces their view that “you just can’t trust others to do anything...”

7. Staying in the comfort zoner
It’s easy to stick with people you know and understand – but there’s one downside; who’s challenging you and testing your thinking?

Whilst it may be uncomfortable to do this, it’s better than experiencing the discomfort of a major problem in the business because no one around you had the courage to say “hang on a minute – what about X?”’

Very often business owners surround themselves with people from the same sector. The thinking goes something like; “unless you’ve been man & boy in my sector for 50 years – you couldn’t possibly have anything to contribute”. This is undoubtedly true in some situations, however innovation comes from picking up ideas from outside the conventional thinking. Mixing with others will increase your chances of doing this. The more diverse your contacts (whether by sectors/age/ethnic group/gender), the more you’ll also be able to “narrow the angles” on potential incoming problems; someone in your group will have had experience of issues that you haven’t – better to learn from others’ mistakes than get extra battle scars yourself!
By avoiding, at least to some degree, these seven common mistakes your business has a far greater chance of not just surviving but thriving! Take a look at each of these areas and ask yourself some tough questions, and be honest! Your answers and the resulting actions you take could make all the difference to your future wealth and happiness.