July, 2009

In today’s business world competition is a factor that every business is aware of – especially small businesses. Smaller businesses, more so than others, tend to go into defense mode as soon as a larger company moves in next door where they fight the competition until they eventually close. However, it’s not the big companies that put them out of business, it was the mistakes made within the business that closed their doors.

This first mistake is failing to manage the cash flow. Before starting a business the owner should determine how much money should be set aside for the purchase of the initial inventory, equipment, and leasehold improvements, with the assumption that no inventory will be sold within the first 12 to 18 months. Many businesses plan enough money to get started and then panic when sales are down. Periodically referring to your balance sheet to project upcoming sales will also help the cash flow.

The second mistake in small businesses is the lack of monitoring and controlling inventory. Monitoring inventory allows business owners to track the most popular items sold, what needs to be reordered, and things that only need ordered periodically. Failure to maintain proper inventory leaves businesses with an abundance of unwanted inventory or a shortage of inventory and missed sales opportunities.

The next two mistakes go hand in hand – lack of developing a business plan and creating a marketing plan. Developing a business plan offers many advantages to small businesses because it gives specific detail of their business and long-term plans making for an easy outline to guide the business through generations. Creating a marketing plan goes a step farther detailing the targeted market they plan to attract and how the business should go about marketing their business to specifically target these customers.

The next couple mistakes deal with the failure to properly train and engage employees. Training and job descriptions make tasks for employees even easier and help the flow of business. Training employees on the policies and procedures of the company ensures that each employee is helping to maintain the company’s appearance and the ensuring customer service. Making sure each employee knows their job description and duties helps to make sure that each aspect of the business is being distributed and taken care of. An important step to ensuring that these employees will put out the most effort is to find employees that match what the company is looking for. Finding someone that enjoys this specific type of business ensures that the employee will care about the company, its success, and making sure their job is done correctly.

Lastly, and perhaps the most vital mistake in this era, is the failure to invest in technology. Today technology allows businesses to know what items are bought as soon as they are sold to make ordering more inventory even easier. These systems also make sale items even easier to ring-up without the hassle of looking through flyers. Likewise, protecting against thefts has been made easy with technology. With this technology, a specific plan should also be in place on cashier procedures to ensure the lack of thievery. Technology has become a huge part of businesses, and the failure to invest in this will only hurt small business owners.

No one wants to see vacant buildings or “Going out of business” signs. For these reasons, avoiding these mistakes is vital to all businesses, not only small ones.

This article is based off one written by Tom Shay.

To learn more about the Main Street Program, both locally and nationally, visit the following sites: www.mainstreetchillicothemo.com and www.mainstreet.org.