Breaking Bad Business Habits

Breaking Bad Business Habits

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Drawing on the experiences and habits of SME owners I have coached and consulted with in the past, here are the top 20 business habits that SMEs have a tendency to perpetuate. It should be noted that although many of these practices actually break the law, regrettably some SMEs are cash strapped – which means they take chances.

  1. Letting someone else prepare your business plan for a fee – but not understanding the outcome. It may convince the bank, but you must have a plan for your future which you understand.
  2. On the topic of business plans: don’t exaggerate (accepting where possible you want to prove that you will make a profit so you can get a loan). On the whole, be honest but realistic, and keep the plan simple and practical. Above all else have a clear and precise executive summary.
  3. Thinking you can beat the Receiver of Revenue – and even worse not answering his letters. Not answering lawyer’s letters doesn’t help either.
  4. Not having a good relationship with the bank manager: keep in with him; he can put you out of business.
  5. Poor communications – not answering phone calls, emails, letters etc. Even if you are having problems with the sender, always answer – if not you will soon be losing business, especially if you are not answering your customer’s enquiries.
  6. When short of cash – over charging on your invoicing and exaggerating your hours. This sector also includes overcharging expenses. This is fraud.
  7. Using your company credit card for personal matters. This would include the company motor car. In addition, overseas trips on the company’s account are against the law unless genuinely on company business.
  8. Taking too much leave and leaving people in charge who do not understand the business. Conversely not taking any leave, which causes stress and family problems.
  9. Thinking product not profit. In the same arena, watch ‘entrepreneurial excitement’, which means rushing into products without testing the market. Nothing kills a business faster than thinking you have a niche market and finding out too late that there are hundreds of competitors.
  10. Signing legal documents and financial statements without understanding the content and not seeking good advice. Always know what you are signing.
  11. Poor presentation skills. This includes proposals that are too long and are rife with bad spelling and grammar.
  12. During negotiations, rather be a good listener than a good talker. You might think you are making a good impression and showcasing your knowledge and experience, but allowing the other party to speak first will actually make a better impression.
  13. Procrastination. The Oxford dictionary sets out the following: indecisive, delay, dither, drag your feet, put things off etc. We all do it, but it is not the way to run a business.
  14. Pushing debtors to pay but delaying creditors. It can help when you have a cash flow problem, but if you overplay, creditors can cause you major problems.
  15. A dangerous practice for SMEs is neglecting advertising and marketing when experiencing cash flow problems.
  16. Ove-capitalisation. Leasing premises, hiring staff and buying equipment when you are not ready for them.
  17. Not understanding people. A bad habit is to continually threaten employees with losing their jobs, leading to staff who are not loyal to you or your business.
  18. Turning your mistakes into the customer’s problems. Remember, the customer is always right.
  19. Confusing turnover with profit.
  20. Perhaps a little contentious but raised by entrepreneurs I have coached and whom assisted me with these comments – the fact that the word ‘entrepreneur’ is being overplayed. They have found that a better practice is to say they are SME owners – there is more chance of obtaining finance because it is often stated that entrepreneurs take too many risks and that a small business owner is more conservative. An interesting point for debate.

How do we stop these poor habits? Much depends on two factors: not having the right mentality to own a business and lack of finance. In the first case, the answer must be that if you cannot take the pace of business and resultant stress, it may be better to go back into employment. If your health is suffering so will your business. With regard to lack of finance, initial training in how to own and sustain a business, as well as a general understanding of business and people are prerequisites.

The major concern I have however, is that in many cases, even if the two points above are conquered, SME owners still continue to believe in the ‘11th commandment’: “Thou shalt not be found out.” Stick to the rules if you want to grow a sustainable business. Even worse is losing a business to bad habits, launching a new venture, and then continuing with the same bad habits. Recognise where you are following poor practices and adjust them!

Bob Power
Bob Power is the owner of Power Corporate Consultants and an expert on buying and selling a business, amongst other things. He is also the author of Let the Signer Beware and How To Buy a Small Business.