Tags: Franklin-NMX-Prosperity-Report

Franklin Prosperity Report: Avoid 3 Costly Small Business Mistakes

By    |   Monday, 03 Feb 2014 03:57 PM

When you’re just starting out running a small business — or even if you’ve been at it for a little while — you’re bound to make a few mistakes. No matter how big or small, any misstep can eat into your profits or make it tough to stay on track with your business plan.

“At a minimum, not avoiding some common pitfalls can lead to the business being less successful than it could otherwise be,” says James E. Rudnicki, CPA, CTP, president, Rudnicki & Associates LLC, a business turnaround consulting firm in Sugar Grove, Ill. “On a large scale, it could lead to failure of the business and perhaps even personal liability for the owner, if, for example, payroll taxes are withheld from an employee’s check and never remitted to the government.” Here are three common mistakes Rudnicki says are also the easiest to avoid:

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1. Not asking for help.


Entrepreneurs are a self-assured bunch, but no one has the time or ability to be an expert at everything. That’s why it’s wise to sidestep mistakes by relying on wise advisers. “Small business owners need to surround themselves with competent legal and financial advisers and listen to them,” Rudnicki says. “One common problem we see in our practice is business owners who decide to ignore their bankers and other creditors when profits fall off and cash gets tight.” Fend off cash-flow, management, and other catastrophes with quarterly meetings with your legal and financial advisers during the first year or two you’re in business.

2. Failing to plan for the cash requirements of a growing business.

Many small business owners start off thinking they’re going to get rich quick, and they don’t set aside enough capital to run the business for several months (when, in fact, a year’s worth of cash on hand is advised). So they can’t keep the lights on or stock the shelves with product.

“You can’t go into a new entrepreneurial venture with plans of immediate astronomical returns. That sets you up for economic and emotional failure,” Rudnicki says. Instead, work with a financial adviser to set several small, realistic financial goals throughout the first two years you’re in business. “Having measurable goals and accountability will help you create and stick to a financial plan,” he says.

3. Being too slow to respond.

There’s no time to drag your feet when something’s not working right in your business. “Small problems that are ignored often grow into larger ones that cannot be or that trigger the demise of the business,” Rudnicki says. Some things a small business owner shouldn’t wait to act on include the loss of a key customer or other significant drop in sales, the loss of a critical supplier, or any cash-flow problems.

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