May 16, 2024

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Top Small Business Management Mistakes to Avoid

Are you making management mistakes that could damage your business? Whether it’s unhappy employees, lack of customers, or poor cash flow, there are many things that can threaten your business’ success. Here are the top critical small business management errors you should watch out for.

Small business management is challenging and complex, and far too many companies squander valuable opportunities because they continue to repeat the same preventable mistakes. SBA statistics on business failure reveal that about one-third of new employer establishments don’t survive more than 2 years,  and by year 5, slightly more than half fail. However, many of these failures are preventable.

While everyone makes poor managerial decisions at one time or another, here are some of the most common mistakes that can seriously derail the efforts of a small business.

Ignoring Sales and Marketing

Startups and small businesses tend to run in boom-or-bust cycles. When they are busy, sales and marketing efforts are neglected in favor of production tasks. Even salespeople pitch in to help, and the difficult work of developing new products and reaching customers is neglected. When the good times fade, the company finds itself struggling for orders without any additional revenue lines waiting to take up the slack. As a small business owner, you need to ensure that your relationship-building efforts remain robust no matter what the prevailing business climate may be. Customers expect to be frequently updated and educated on new products and industry developments. If you are unavailable, a competitor will be more than happy to fill the void.

Being Adverse to Change

Successes in business are hard-won. Once you’ve figured out what products or services are profitable to sell, and what methods work best for operating your business,  it’s natural to want to continue doing things the same way. But it’s not always advisable. What customers want to buy or need to buy can change from year to year. How and where customers make purchases can change.  What you need to do to hire and  retain good employees may change, as may the technology for operating your business efficiently. To stay competitve and grow your business your business may need to change, too. 

Micromanaging Employees

A common characteristic shared by many owners and managers in small companies is the urge to micromanage their employees. This comes from a deep sense of connection with the business and a belief that no one else cares enough to complete the task at hand in exactly the right way. In addition to inhibiting the potential of the employee, the manager ends up with such a heavy workload that it’s impossible to be completely effective at any one specific task. The effects of micromanagement negatively affect productivity, aptitude, engagement and progress. Fight the urge to intervene, and allow your employees to reach their fullest potential.

Failing to Understand the Financials

Most small companies expect to grow, and owners and sales managers want to take advantage of every new sales opportunity that presents itself. But capitalizing on those opportunities and growing the business often requires money. If the business doesn’t have sufficient cash flow or retained earnings, the funding needs to come from borrowing or an investment of funds from either the owner or an outside investor.  While owners may be well versed in the operational aspects of a particular industry or trade, many lack a basic understanding of a profit and loss statement, balance sheet and cash flow analysis. Expenditure-related decisions that are made without a clear understanding of the financial consequences can be devastating. While closely monitoring sales and profits is important, understanding cash flow trends should always be your primary focus.

If expansion seems justified after careful consideration, it is critical to thoroughly research and review the proposal to establish feasibility. If the project receives a green light, make sure the right people are in place to carry out the initiative in a timely, cost-effective, and profitable manner.

Lack of Accountability

Accountability is a difficult concept for many small business owners to understand and properly practice, especially for those without previous managerial experience. Disagreements and hard feelings arise when expectations are not met and support has been inadequate. Before addressing a performance issue, it is important to ensure that the team member has all the tools and training required to successfully complete the tasks included in their job description. It is your responsibility to set obtainable and defined goals. When the standard is clearly established, employees who consistently fail to comply must be asked to leave.

Failure to Delegate

Tied closely to micromanagement, failing to properly delegate comes from a variety of insecurities including lack of trust in subordinates, fear of creating a perception of laziness and risk avoidance. Delegating effectively can help benefit the employee, organization and manager by producing a higher quality of work and raising employee morale. When delegation is done properly, the manager has additional time to attend to the more important functions of the business such as sales, marketing and future planning.

Displaying a Negative Attitude

It’s natural to be worried if business seems to be slowing down or if your company is experiencing financial difficulty. But don’t let your worries cast a negative shadow over your employees. Displays of negative emotion breed fear and apprehension, so it is important to show confidence and help foster a team-oriented environment.  Be sure the team dynamics are such that members of your team are comfortable giving you suggestions for change based on their experience with customers or doing their work.

Lack of Sufficient Planning

Small businesses often grow organically and tend to deal with difficult situations as they arise. This often creates a culture of crisis management, which is stressful for owners, managers and employees. Establishing specific short- and long-term plans will help your business move in a positive direction and avoid the many pitfalls you might otherwise encounter. Several important areas require intermediate and advanced planning as well as periodic review:

  • Sales
  • Payroll
  • Product and service development
  • Marketing
  • Debt

Learn from Your Mistakes

Admitting to a mistake isn’t a sign of weakness. For employees, the boss becomes more human if she or he steps up and displays the confidence to own a mistake. It serves to confirm the company’s commitment to honesty, learning and improvement. When responsibility is denied and blame is shifted, your staff will become less candid and more cautious. Employees always function better in an environment where they know that an occasional mistake is considered part of the learning process and that management encourages personal growth.

Every business will face some issues when trying to grow, but being proactive about problems you know may come up will help you better handle the unexpected ones. Always make sure you and your team know who is responsible for handling issues and communicate to your employees a clear escalation plan to ensure that you can contain small problems before they become big problems.