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Kenneth W. Keller: The biggest mistakes business owners can make

Inside Business

Posted: July 14, 2009 3:57 p.m.
Updated: July 15, 2009 4:30 a.m.
 
People who own businesses make mistakes, perhaps more mistakes than their counterparts in Corporate America. This happens because in Corporate America, making mistakes is not only something to be avoided, making a big enough one means paying the ultimate price of losing your income. The tendency is to maintain the status quo.

In entrepreneurial America, risk taking begins when the idea to launch a business surfaces. It grows with creating income for the owner and the employees that join the cause. Maintaining the status quo and failing to take calculated risks can harm, even doom any organization, but taking uncalculated risks can also be the ultimate cause of failure as well.

Through the years, considerable research has been done to document the reasons behind the failure rates of businesses. Here are several of the leading causes; none of them related to what most people believe is the real reason behind failure: the lack of revenue creation.

  • Partners not in sync: Most owners don’t have partners because they want total control over their businesses. Others have partners but both are clear on vision and short term objectives and have divided the work to achieve the goals set. But when two partners don’t agree on goals, timing, or process and cannot successfully divide the workload and responsibilities, fireworks of some sort usually occur.
  • Hating the numbers: An amazing percentage of owners dislike the financial aspects of business ownership because they are caught up in the operations on a day to day basis. Successful owners understand that understanding the components of cash flow, balance sheet and income statement is the only way to run a business in the long term.
  • Not listening: One of the most significant strengths of an owner is stubbornness; their ability to see a vision and stay on course despite the difficulties they encounter. This spirit is one of the reasons why people succeed as owners. The flip side of this is that owners often hear what they want to hear, not what they need to hear. Sadly, there are some owners who spend countless hours shopping for the perfect professional advisor who will only listen to someone who tells them exactly what the owner wants to hear.
  • Avoiding conversations: Most owners do not schedule or hold performance evaluations with their direct reports in an organized and systematic way. Because the leader sets a poor example, those managers do not take the time to schedule appraisals either. The result is an organization filled with people that assume unless someone says something to them, they are doing a terrific job and wonder when their next raise is coming even when they are not meeting the qualifications of the job.
  • Old marketing materials: When a company does not invest in the external packaging most visible to current and prospective clients, it risks falling behind. When a logo looks old, so does the company. When letterhead, business cards, brochures and the company Web site aren’t current, it becomes a competitive disadvantage.
  • Hiring just anyone: “You’re not the person I hired!” is a common thought many owners have once a person starts work and the true colors of the employee emerges. An interview is when an applicant is on his or her very best behavior. Owners should invest time in learning how to interview to surface potential issues related to performance, values and attitudes, many hiring decisions could be avoided. n No plan: Running a business by the “seat of your pants” is risky and one of the principle reasons organizations fail. The lack of a plan also plays havoc with employees, who feel whiplash with the sudden changes in strategy and tactics. Those employees, who seek challenge and security, often burnout because keeping up with the whims of an unfocused owner is exhausting.
  • Not the right bank: As organizations grow, so do their financial requirements. The financial institution that the owner selects as the business is started may not be the one needed as the company grows. Larger banks provide convenience with multiple locations but often lack the ability to have a personal relationship with someone who understands the specific needs of the business. A smaller institution may not offer the same level of convenience because they do not have as many locations, but the relationships will likely be at a higher level, running deeper and longer.
Making mistakes goes with the territory but if recognized early on, they can be avoided along with the costs that accrue.

Ken Keller is president of Renaissance Executive Forums, which brings business owners together in facilitated peer advisory boards. His column represents his own views and not necessarily those of The Signal.

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