Good work habits are not enough if you are self-employed or own a small business, according to Ruth King, president and CEO of ProfitabilityChannel.com. A lot of us --myself included--work harder, but not smarter, according to King. She was profiled in a July 1, 2007 issue of Bottom Line Personal. The issue was in a stack of newsletters (excellent!) that my mother gave to me. Here are "dumb mistakes" that can kill our best efforts.
1. Over-relying on a single customer. In my bag lady post, I wrote about this topic. Basically, one small publication paid me well and represented about 80 percent of my freelance income. When they added a staff position, my freelance work flow (and income) suffered.
Likewise, King says that small operations can fail when a single customer represents 50 to 100 percent of income. Your client -- like mine -- can shift "a previously outsourced function in-house," or cancel a product line or contract, King said in Bottom Line Personal Finance. They can also just fire you. Anything can and will happen.
King--who wrote The Ugly Truth About Small Business: 50 Never-saw-it-coming Things that Can Go Wrong...And What You Can Do About It - urges a small biz to not let a single customer represent over 25 percent of revenue.
2. Letting key employees go to competitors. Important workers can walk out the door with key contacts and knowledge. Solution: keep 'em happy with pay, perks and praise, King says.
3. Not minding the books: Small companies sometimes place too much faith in their bookkeeper. I've heard of small companies that have been hit by embezzlers who were either trusted employees or so-called friends.
Their experiences remind me of the Billy Holiday song: God Bless The Child (who's got his own). checkout this video clip of God Bless the Child as sung by LaKisha Jones on American Idol. (wonderful!)
Bottom Line: Watch your own back, study your books and create some form of financial oversight.
"Do not give a bookkeeper check signing privileges," King says. She also recommends that you direct your bank to send financial statements to your home.
4. Naively pushing a hobby into a workplace: Been-there-done-that. This is a big problem for many entrepreneurs. This topic deserves its own post and I will circle back on this subject later. But here's a quick summary: Do your homework before you turn a craft or passion into a full-time business.
5. Maintaining ties with just one bank: King says that there is safety in financial numbers. Diversify your portfolio of banks with relationships with at least two institutions.
6. No sick- day plans. Again this topic is worthy of its own post and I will post a piece just on this subject. But here's the quick sketch: Sick days, illnesses and accidents happen. If you work for yourself, you need a plan to cover work stoppages.
7. Failing to delegate. Mind the store, but don't be a total control freak. You will make yourself crazy if you try to do everything all the time.
8. Poor or unreliable contractors or suppliers: A friend of mine once suffered a major business setback when he worked with a pair of unreliable sub-contractors. Their failure to show up for work on time or to deliver quality work reflected poorly on him and cost him money.
source: July 1, 2007 issue of Bottom Line Personal
Ruth King, president and CEO of ProfitabilityChannel.com.
other recommended resources: http://www.startupnation.com/ or http://www.smallbusinessadvocate.com/
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