Succeed By Not Failing!

Succeed By Not Failing! Learn the 50 most common reasons businesses fail and how to avoid them Ed Martin MicroBiz Made Simple

Succeed By Not Failing!

Copyright © 2009 Ed Martin

All rights reserved. This book may not be reproduced, in whole or in part, in any form or by any means electronic or mechanical, including photocopying, recording or by any information storage and retrieval system now known or hereafter invented, without written permission from the author, Ed Martin. LIMIT OF LIABILITY AND DISCLAIMER:

This manual is based on personal experience and is designed to provide information about the subject matter covered. Every effort has been made to make it as complete and accurate as possible. However, there may be mistakes both typographical and in content. Website URL's and content can change overnight – so if you click through to a site and it's not there, please contact the author so that it can be corrected. The author shall have neither liability nor responsibility to any person or entity with respect to any loss or damage caused or alleged to be caused directly or indirectly by the information covered in this manual. TRADEMARKS:

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Table of Contents Introduction......................................................................................................................................5 Start-Up............................................................................................................................................7 1. You start a business for the wrong reasons..............................................................7 2. You mistake your business for a hobby...................................................................7 3. You leap before looking...........................................................................................8 4. You don't know your business well enough............................................................9 5. You're going to get rich quick..................................................................................9 6. You have a bad business model.............................................................................10 7. You have a poor business plan...............................................................................10 8. You don't have the right amount of money to start................................................11 9. You run out of money............................................................................................11 10. You have a bad location........................................................................................12 Marketing and Sales.......................................................................................................................13 11. You underestimate the competition......................................................................13 12. You don't know the market...................................................................................13 13. You don't have a niche..........................................................................................14 14. You don't market and promote your business effectively.....................................15 15. You don't have a website......................................................................................15 16. You have a bad website........................................................................................15 17. You put all your eggs in one basket......................................................................16 18. Your don't know how to sell.................................................................................16 19. You don't have a Unique Selling Proposition.......................................................16 20. You don't know the worth of what you're selling.................................................17 21. You have unreliable suppliers...............................................................................17 Customers......................................................................................................................................18 22. You have poor customer service...........................................................................18 23. You can't say no....................................................................................................18 People.............................................................................................................................................20 24. You don't have a team...........................................................................................20 25. You don't have the right number of employees....................................................20 26. You don't hire the right people..............................................................................21 Money............................................................................................................................................22 27. You have too much debt.......................................................................................22 28. You don't manage cash flow well.........................................................................22 29. You don't have enough cash reserves...................................................................22 30. You don't generate cash flow early enough..........................................................23 31. You have too much money tied up in fixed assets................................................23 MicroBiz Made Simple

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32. You're too cheap...................................................................................................24 Management...................................................................................................................................25 33. You have poor management skills........................................................................25 34. You don't act like the owner.................................................................................25 35. You have poor recordkeeping...............................................................................26 36. You over-expanded...............................................................................................26 37. You procrastinate..................................................................................................26 38. You can't decide who is in charge.........................................................................27 39. You get distracted.................................................................................................27 40. You're disorganized..............................................................................................28 41. You don't plan for success....................................................................................28 42. You don't have an exit strategy.............................................................................28 Entrepreneurship............................................................................................................................30 43. You quit too soon..................................................................................................30 44. You get too excited...............................................................................................30 45. You are over-confident.........................................................................................30 46. You don't have any business sense.......................................................................31 47. You don't change with the times...........................................................................31 48. You don't have passion.........................................................................................31 49. You burn out.........................................................................................................32 50. You don't believe..................................................................................................32 Good luck!.....................................................................................................................................33

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Introduction It's fine to celebrate success but it is more important to heed the lessons of failure. Bill Gates Starting a new business is risky. New businesses, especially small and microbusinesses, fail at an alarming rate. The SBA estimates you have less than a 40% chance of surviving more than a few years. The odds are even more against you starting a business that becomes truly profitable. Surprisingly, of the 80% of new businesses that failed, over 60% were profitable when they went under! Why does this happen? Why do so many businesses, even those making money, fail? Why do they not live up to their potential when they could have succeeded? The main reason is that people starting a new business don't know the most common pitfalls that cause small businesses to fail. It is only common sense that if you can learn what caused other businesses to fail you can increase your odds for success. What's more, other people's mistakes don't cost you a cent! I've put together a list of the 50 most common reasons new and young businesses fail. The list is based on my experience with success and failure, from talking to other new and experienced entrepreneurs, and from observing the findings of others. It is a remarkable list. I think every success story is different, but failures can be grouped together. There are common threads in their stories. Patterns emerge. I've grouped the pitfalls into common themes covering marketing, management, finances and planning. If you can learn to recognize these pitfalls you can avoid them. This is especially MicroBiz Made Simple

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important before you start your business. It is much better to learn why other businesses failed and plan to succeed before you start your venture than it is to try to solve problems once you are up and running. It's just too hard, too expensive and too late by then. Learn from businesses that have shut down. Study the problems that caused them to fail and increase your own likelihood for success. I've learned that mistakes can often be as good a teacher as success. Jack Welch

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Start-Up A journey of a thousand miles starts with the first step. The start-up stage is the basic who, what, when, where, why and how stage for starting your business. You decide what you want to do, where you're going to be, why are you going into business, when do you start, and how will you do it. This is when you do your planning and lay out the path you wish to follow to become successful. When asked, many failed business owners trace the roots of their failure to this stage. Don't let your first step trip you up. You can't overestimate the need to plan and prepare. In most of the mistakes I've made, there has been this common theme of inadequate planning beforehand. You really can't over-prepare in business! Chris Corrigan 1. You start a business for the wrong reasons

You want to be your own boss. You want to get away from everyone and work on your own. You think it will be a quick path to making lots of money. You won't have to work as hard when working for yourself. You'll have more time to be with your family and do things you want to do. All are good reasons, but they won't contribute to your success. They are goals to achieve and to motivate, not reasons to expect success. A better reason is that owning a business lets you work harder for yourself and be more determined to succeed. It lets you do something you love to do, and that you are passionate about. You know your business offers something that fills a need in the marketplace. Instead of just wanting to be free from a boss, you want to take charge. You want to be on your own to make decisions, plan actions. You want responsibility instead of wanting to escape it. Instead of escaping from the world you recognize that even a solopreneur works with others, and you enjoy the give and take in dealing with all kinds of people. 2. You mistake your business for a hobby

The difference between a hobby and a business is that a hobby doesn't make money. It costs money. Just ask the IRS. People often start out with a hobby they enjoy and try to make a business out of it. MicroBiz Made Simple

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The problem is that their new business never gets beyond the hobby stage. You can pick up and drop a hobby whenever you feel like it. You can go off on tangents, and make decisions on a whim. You can't do that with a business. It requires much more effort. You need to work seriously and focus on generating revenue with a business instead of spending money on a hobby. 3. You leap before looking

People are often so anxious to try out their idea for starting a business that they don't think about what it really will take to fulfill their dream. Before you make the leap, sit down and do a self-assessment. Make a list of the things you love to do. It doesn’t matter what they are – just put them in the list. Make a list of your skills and capabilities, things you can do, and things you know how to do well. Make a list of the things you have done. Make a list of your personality traits. Take a test if you need help. They are easy to find online. Consider all of these things before you make the leap: • What do you want to achieve? • How much money do you want to make? • Where to you want to work? Anywhere, at home in your pajamas? In your own office or store? On Main street or the beach? • How much and long do you want to work? Do you see yourself putting in 2 hour days or working 80 hour weeks? Are you really ready to give up the steady income and security of your job and risk the time and money that will go into starting a business? If not, then don’t go fulltime yet. Find an extra hour or two a day. Do some moonlighting and see how that goes. Think about your personality. Consider these questions: • Do you want to be famous, in demand? A local move & shaker or an Internet celebrity? •

Are you a people person? Do you look forward to interacting with

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• • • • •

customers? Do you need to be around people to get your creative juices going? Do you like working alone? Can you handle distractions if you work at home or do you need your own space? Do you have a 9-5 work mentality and like to leave things at the office? Do you have confidence in yourself and what you are doing to stand up to competition and get through hard times? Are you flexible enough to change your plan if things go wrong or new opportunities arise?

Think hard about the answers to these questions so that you chose a business path that is right for you. 4. You don't know your business well enough

People start ventures all the time without really understanding the business they are getting into. Sometimes they have an idea and are passionate about it, but don't really know how to translate that idea into a real business. Other times they see someone else succeed with an idea and try to copy it without really understanding all of the working parts of the business. Problems appear when these people have to make decisions about suppliers, pricing, and marketing because they don't really understand what they are selling or the business they are in. Nor can they get good help because they can't judge prospective employees' qualifications. Make sure you do understand as much as you can about the business you are starting and the product or service you are selling. New franchisees often get the chance to work in an existing franchise so they can learn about the business for a good reason. Take time to become an expert in your business before you have to make the critical decisions that can make or break your venture. 5. You're going to get rich quick

There is no shortage of get rich quick schemes online and off that lure people into starting a business without any real hope of success. If someone is offering you a sure-fire money making business idea, run away! Do some investigating to see if anyone has made any money following that business model. If it sounds too good to be true, it almost certainly is. MicroBiz Made Simple

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6. You have a bad business model

People often are so convinced their idea will work that they don't do any research to see if there is really a need for it. Then are they stunned when no one wants to buy their product or service. Spend some time on market research to see that there is a demand for what you are selling. If you think you are meeting a special need, then make sure there really is a niche market for you and that it is big enough to let your business succeed. If you find out the market is not there before you start, all you are out is some time. If you wait until your business is up and running to find out you've got no market you are out your business. Doing market research won't guarantee success, but it can help you avoid failure. If your business can't make money, it doesn't matter how much planning you've done or how well you execute your plan. You will fail. If your business won't make money until year three, but you need it to support you in year two, you've got a big problem. People starting a business often get so caught up in the excitement of the planning and the start-up that they forget about this central question, "How will your business make money?" Do your homework before you start. 7. You have a poor business plan

Many people think they can start and run their business on the fly and then make up for not planning by using quick thinking and being flexible. Not a good idea for most. Successful small businesses don't just happen. They occur because of well thought out and executed business plans. Just having a plan isn't enough. You can have a beautifully bound, full color 100 page business plan that guarantees your business will fail, just as you can have a single page plan that will steer you towards success. It isn't important what your plan looks like. All that matters is what went into preparing it. Banks and other investors might prefer the 100 page glossy version to the single pager, but in truth they really just want proof that you have a viable business model with a real market and a way to exploit it. Just blindly filling out a business plan template that gets tossed into a drawer isn't much good either. You need a plan that you can follow. Your plan forces you to take a hard look at your financing and marketing, at the competition, at the market place, and at your sales strategy. It gets you do think about your short and long term goals and how your business can reach them. It gets you thinking about MicroBiz Made Simple

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problems that could arise and how you will solve them. Make your plan a living document, something lean green. Make it something you can and do update regularly and you'll have a powerful tool to guide your business to success. 8. You don't have the right amount of money to start

Small business owners often underestimate the amount of money or capital they need to start their business. Sure, you can start your business, especially an online business, on a shoestring, but problems come when you need to expand or have unexpected costs, or it takes longer than expected to generate cash and profits. Your business can easily end up on life-support because it needs more capital to survive, and you can find yourself in tough spot because your business isn't giving you the profit you expected. To avoid this, before you start your business, figure out how much it will cost to operate it once it is up and running. Make a list of all the expenses you'll have: marketing, advertising, rent, online expenses, office supplies, professional fees H all of your day to day costs. Be thorough and don't underestimate your costs. Next estimate how long it will take to get your cash flow going to meet these expenses and to generate profit. Be careful not to overestimate how quickly this will happen. Inexperienced entrepreneurs are often too optimistic predicting when they will see a profit. Plan to have enough capital to start your business based on those estimates. Don't go overboard though. Just plan for what you need. If you have borrowed too much you'll end up paying interest on money you don't need. If it is your own money, you aren't using it for better purposes and getting a better return. Plus, with excess capital in your business you might be tempted to spend it on things you don't need and fail to keep a close watch on costs. Strike a balance to get just the right amount of money for your startup. 9. You run out of money

Don't forget to figure out how much money you need to live on while your business is getting started. If you don't have a cushion to live on, you need to figure out how you're going to pay the bills. You can't just assume it will all work out. MicroBiz Made Simple

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Start saving money and cutting expenses to build your bankroll before you start your business. Consider taking on a part time job to pay the bills, or start your business on the side while you still have your day job. It is a tragedy when owners have to abandon a growing business because they can't cover their living expenses. 10. You have a bad location

Location, location, location. Many businesses are tempted by cheap leases and set up shop in the wrong place, and then never get going. What makes a good location? Start off by forgetting about price. Think about where your customers and employees are, how much competition in the form of similar businesses is around, what kind of accessibility there is by highways, public transportation and on foot, what parking and lighting are like, what the condition of the building is, how well your business fits into the neighborhood ,and how it will be received. See if there are any incentives or tax breaks for opening a business in the area. Then you can start to look at price. You still might have to make compromise on cost or other criteria, but you can do it after weighing all the options. A good location can save a struggling business and a bad location can kill a good business so choose wisely. The same sort of thing applies for online business location. Get a domain name and URL with your business name in it. Make sure it is memorable, easy to spell and easy to type. When you are looking for a host for your website, don't go crazy with extra bells and whistles. If you just need a simple site, then don't overspend. If you work at home, make sure you've got a good set-up where you can work without interruptions. If you need to see customers at home, make sure you have a professional looking office and that you don't have any zoning or covenant restrictions.

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Marketing and Sales You can't sell anything to anybody if they don't know you are there. Too many business owners minimize the importance of getting their message out and promoting their business. If you're not marketing and promoting your business, you're likely to fail. You also have to remember that you are not alone in the marketplace. You have competition. They won't just sit back and watch you take business from them. Wise men learn by other men’s mistakes, fools by their own. H.G. Brown 11. You underestimate the competition

One of the main reasons people start a businesses is because they think they can beat the competition that is out there already. But your competitors, even the fat and happy ones, aren't going to sit quietly and watch you take away their business. They will respond. What's more they have their own plans for keeping their customers loyal and winning new business. And they might well be smarter than you are. So don't get so wrapped up in running your own business that you forget to watch the competition. Too many businesses fail to react to changes their competitors make. They forget that competitors want to succeed as much as they do and will work just as hard to win. You might even learn from what your competitors are up to. 12. You don't know the market

Don't assume that just because you've got a great business idea that there is a guaranteed demand for it. Don't forget that customers have minds of their own. They might not agree with you. Customers go where they can get the best value for their money. New business owners often don't bother to see if there really is a market for their product or service, and if so, will people pay the price they want to sell it for. You must make sure that you are solving a problem or meeting a need at a fair value or you won't have any customers. MicroBiz Made Simple

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Do some research. Do some test marketing if you can. This doesn't have to be complicated or expensive research. Do a survey. Talk to suppliers and potential customers. Look at what the competition is doing. Talk to people in a similar business or to people in the same business but in a different, non-competing area. See if they are successful. See how well similar products or services are selling. Focus on what customers are looking for and what need is not being met. Remember, starting a business isn't just about you doing something you love. Its about your customers and meeting their needs. No customer = no business. Don't forget that you have to keep studying the market, doing market research and tracking customers even after you have been in business for a while. Markets change. Customer needs evolve. Forgetting to keep up can undo all the success you've earned so far. 13. You don't have a niche

You want to sell to the biggest market you can possibly get right? Sell to everyone, everywhere. Why limit yourself? Sounds great. Just one thing, it doesn't work well When you try to compete with big businesses in the open market you'll lose. They have more money and resources to spend. You can't take them on head to head. Even with no competition you just don’t have the resources to go after everyone in a broad target market. This is true for online businesses as well. So instead, don't compete with the big guys head on. Don't try to be all things to all people. Focus the resources you do have on a niche, which is nothing more than a specific, smaller part of the total market. For example instead of trying to sell an accounting program to everyone in business you gear your marketing effort towards people with home businesses, or maybe even a smaller niche like people with home child care services. You can compete against the big boys in these smaller markets and become the goto resource for a niche. Because niche markets are small, you can reach your target market, customize your message for them and customize what you offer to meet their needs without breaking the bank. You can be seen by members of the niche market as their best option because you are there with them. You understand their needs and deliver what they want.

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14. You don't market and promote your business effectively

Customer's can't buy from you if they don't know you are there. They won't come looking for you. And all too often they don't know you are there because you're not doing effective marketing and promotion. Marketing isn't really all that hard. There are basic, well proven methods for getting your message to your customers through advertising and promotion, and even plenty of ways to promote your business for free. If you don't know anything about marketing get help from someone who does, and plan to start learning as much as you can. Marketing is even more important for online businesses who have to constantly promote their sites or be lost in all the clutter on the web. Online or off, if you get so wrapped up in the daily operations of your business that you don't spend time on marketing you can soon find yourself with no business to operate. 15. You don't have a website

Really, is there any reason not to have one? If you don't have one you are going to be losing out to competitors who do. 16. You have a bad website

Just having a website isn't enough. It has to be one that meets the needs of your business as well as the needs of your customers. It should make your business look good. It should be professional looking and easy to use. It should let your customers learn about your business and the products or services you offer. It should tell readers how to find you, with contact info or site location. It should also tell them how they can buy from you. For many businesses the website is the only form of contact you have with customers, so you want to make it as easy as you can for buyers to make a purchase. You also have to be careful that you don't go overboard. A great website won't turn a bad business idea into a winner. Nor should you spend a lot of time and money in building a site so fancy that your basic story gets lost and customers get distracted or lose interest. More design and graphics is seldom better.

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17. You put all your eggs in one basket

Many small businesses are built around just one product or service, or have just one big client who generates most or even all of their revenue. It is easy to work that way and many businesses find success, but disaster is always right around the corner. If that customer goes away or the demand for the product disappears you're in trouble. If you are dependent on one customer you don't want to risk losing them by dealing with a competitor, but they might not have the same loyalty towards you. You are probably just a small fish for them and they have their own business needs. That doesn't mean you can sit be idly. You should always look for ways to diversify the products and services that you offer, and be on the look out for ways to expand your customer base. Have a backup plan just in case something does happen and you lose your customer or market. 18. Your don't know how to sell

Many businesses can get potential customers but aren't successful at converting them into actual buyers. There are several ways to address this. First, if you don't understand the basics of negotiating and selling, it's time to learn. Second, if what you are doing doesn't work, try a different selling technique. Third, listen to your potential, past and current customers about why they are not buying from you. Set up a feedback mechanism or ask them. Maybe it isn't really how you are selling but what you offer. Maybe the customer is looking for something else or your message isn't clear. Find out so you can sharpen your sales effort. If you need help, get it. 19. You don't have a Unique Selling Proposition

Your Unique Sales Proposition (USP) is what sets you apart from your competition and motivates buyers to act. Many businesses don't think about or come up with this proposition. They don't have a message that promises any great value or benefit to the customer. There is nothing unique or distinct in what they offer. The message is just "buy from us" because we're here. It's no wonder customers will go somewhere else. You can come up with your USP. It should let your prospective customers know why they should buy from you instead of someone else. It should tell them that no one else offers what you have. It should explain that if a customer buys from you MicroBiz Made Simple

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they will get a certain benefit. It should be so compelling it gets potential customers to become buyers. Think about what you offer: a unique benefit, incredible prices or selection, extra good service, expert advice, or a fantastic guarantee. Make a list of what makes your business great and work from there. Whittle your list down to until you have a clearly defined message that your customers can take and act on. Your USP should be part of all your marketing, advertising and sales efforts. It should be what customers remember when they think about your business. Just make sure you actually can deliver on it! 20. You don't know the worth of what you're selling

Setting the right price for your product or service is one of the most important decisions you have to make. You have to pick one that your customers are willing to pay and that produces a profit for you. A prime cause for business failure is to not include in the price everything that goes into the cost of an item. Also, mess up on the cost/sales volume ratio and you can find yourself going under quickly. If your customer perceives a higher value for what you are selling than you are willing to charge, you leave money on the table. If they perceive a lower value, then you are not making sales. If you are offering a service you need to have clients, but don’t sell yourself short to get business. Study the market and where you fit into it. Find out what others are charging for similar work. Check with other people to see what they are charging or talk to prospective clients about what they paid for past projects. You might need to price lower when starting out in order to win projects, but always know what the going market price is. 21. You have unreliable suppliers

You can't sell what you don't have. Take time to build a good relationship with your suppliers, but if one of them flakes out on you, look for a new one fast.

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Customers It's easy to forget that customers change. Few businesses can survive with a “sell it and forget about them” policy. You can't have a business without customers. Ignoring their wants and needs is another common and fatal mistake. Mistakes are the portals of discovery. James Joyce 22. You have poor customer service

Good customer service is one of the biggest advantages small businesses have over the Wal-Marts of the world. Mess that up and you lose one of your strongest selling points. Once you have customers, you have to keep them. You have to earn their loyalty. After the sale don't just forget about that customer in the rush to get the next one. Remember, it is always easier and cheaper to sell to an existing customer than to find a new one. Pay attention to what the customer wants and needs. Give them a feedback mechanism. Talk to them. If a customer calls or emails with questions, get back to them right away. If you have employees, make sure they all understand the importance of customer service, but also give them support when dealing with customers. It's also better to keep employees happy than have to replace them. For a small business, one disgruntled customer can cause big problems, so keep discussions cordial and professional. Try to find a win-win solution to problems and complaints. Don't fall into thinking that the customer is always right H they aren't. When you reach the point with a customer that they are causing too much trouble, you have to decide if you want to keep doing business with them. If they are costing you too much time and money and are disrupting your staff maybe it is time to say you don't want their business any more. Of course if it is your biggest customer and he's a jerk, then you might want to work things out. 23. You can't say no

Sometimes you have to be able to say no to customers. No, you can’t meet that changed deadline, or no you can’t just add another 20% more work to the project MicroBiz Made Simple

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for the same price. You need to know when to take a stand and when to be flexible. It is the art of the negotiator. Learn it or you'll end up doing a lot of work for free.

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People Successful entrepreneurs understand their own strength and weaknesses. They see the potential in opportunities, in themselves and in others while the less successful are blind to this. Those who succeed are able to influence those around them and to delegate responsibility to others. Many business failures are caused by the owner trying to do too much, getting bogged down in details and losing the big picture. Successful business owners know when they need help and find people to give it so they can focus on the things they do best. Learn from the mistakes of others. You can’t live long enough to make them all yourself. Eleanor Roosevelt 24. You don't have a team

If you are too busy focusing on the day to day tasks of running your business you won't have time to look ahead and think about big picture. That is a recipe for failure. It is false savings to think you should do everything yourself. Successful businesses, even solo operators, use other people's time and money to grow their business. Spend your time where you can have the most effect and build a team to help you with the rest. If you are not a good copy-writer or designer, don't be afraid to farm that work out. Need a website but not sure you can design one that will to the job? Hire someone. There are people who can do jobs fast, well and for a good price, so use them. Your team can include employees as well as people you work with or people you turn to for advice. Put together a good one to help build your business and improve your prosperity. 25. You don't have the right number of employees

If you have employees, they will be one of your biggest expenses, so make sure you have the right number of them. Too many means bored, underworked employees and extra cost to you. Too few means overworked and unhappy employees, and performance will suffer. Its not easy to work out the right number, but it will be worth it in terms of expenses to the business and employee happiness MicroBiz Made Simple

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and productivity. 26. You don't hire the right people

It's a big step for a small business to hire an employee One that you can't afford to mess up. If a big company makes one hiring mistake they'll survive. One hiring mistake in a small business with only a couple of employees can be a disaster. Take your time in selecting an employee. Find one who is a good fit for you. Make sure you and your business are a good fit for them. You will be a team so you need to be compatible and have complementary skills. Make sure potential employees understand what they will be doing. In small businesses employees often wear many hats and do different jobs. Some people love that, but it doesn't work for others, especially if they are coming from the corporate world where job titles and functions are more narrowly defined. If you need a jack of all trades, let new hires know that up front. Make sure they know there is no staff support to make the coffee, do the copying or answer the phone in a small business as well. If you do have an employee that isn't working out, then don't let the situation drag on. It costs you money and disrupts the business. But before taking action, check to see what the law where you are says about firing an employee. Do it the right way.

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Money Money plays a huge role in the success or failure of your business. Money problems can happen at any time and for a variety of reasons. Not starting out with enough money and bad cash management are common causes for business failures. Since money is so important to your business keep close track of it. Know where and how it comes and goes or you might end up with none at all. Wise men profit more from fools than fools from wise men; for the wise men shun the mistakes of fools, but fools do not imitate the successes of the wise. Cato the Elder 27. You have too much debt

A common trait of businesses that fail is that they have too much debt. They get into trouble because they underestimate their costs when starting out and overestimate their revenues. They end up spending too much at the start and can't cover expenses later, before they start to generate cash. Don't let your debt spiral beyond your means to repay it. 28. You don't manage cash flow well

Businesses, even profitable ones, can get into trouble because they don't manage their cash flow right. You can be profitable, but not have cash on hand to pay your employees, suppliers or rent if it is all tied up in inventory and accounts receivables because your customers haven't paid you yet. That's why it is important to keep close track of the money and when it comes in and goes out. Collect your receivables as soon as you can. Better yet, try to get paid in cash without credit. Try to pay your bills as late as you can. Think about using just in time planning for inventory H get only as much as you need and only when you need it. That requires careful and accurate planning, but can give big rewards in your cash position. Watch your expenses like a hawk. If you are locked into a certain selling price because of the competition or the market, one way to improve your bottom line and cash flow is to mange your costs. 29. You don't have enough cash reserves

Businesses fail because they don't have sufficient cash reserves when problems MicroBiz Made Simple

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arise. Business owners tend to overestimate how fast sales will come. They don't plan for surprises like big energy or material cost spikes, strikes, problems with suppliers, or natural disasters. When these things happen or when sales are slow you need to rely on your cash reserves. If you don't have enough you are in big trouble. You can avoid this common pitfall by knowing how much money you'll need to keep your business going through tough or slow times and then building your cash reserves to cover expenses for a few months at the very least. This also means you can't be pulling money out of the business too soon. You need those reserves. When business owners do run out of money they often turn to the funding sources they used when starting up their business. For many that means tapping their credit cards again, pulling money out of their house, or trying to get a loan from family, a bank or a private investor. They run the risk of burning up those funds and now they are on the hook if something goes wrong and the creditors come calling. 30. You don't generate cash flow early enough

For some businesses there can be quite a delay from the time when the product idea was formed until it is developed, tested, launched and starts to bring in some revenue. Even a service can go through a lengthy development and launch phase. What does your business do for cash in the meantime so you stay afloat? Consider selling a simpler or a beta version of your product or service until the final version is ready. Look for some other work you can take on from someone else. Do some freelance or outsourced projects to generate some cash. Consider what other products or services you could resell. This work might not be what you really want to do and might not make a lot of money, but it can bring in cash that you need to keep your business running in its early days. 31. You have too much money tied up in fixed assets

Don't fall into the trap of investing so much money in fixed assets like machinery, land, buildings, installations, vehicles, or technology that you do not have enough money left over to operate your business. Look for less expensive alternatives to these fixed assets like used equipment or less expensive locations. You can always upgrade later if you need to.

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32. You're too cheap

Don't confuse being cheap with saving money. The price you pay for something doesn't always reflect its true cost. If it will save you money and time and produce a better result to hire someone to do a job, then doing it yourself on the cheap is a mistake. Don't waste your time on low level tasks if you could be doing better things. On the other hand, don't buy something just because it is cheap. Get what you need to do the job right. If it costs more but does a better job, then its a better buy.

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Management Management skills are vital for a successful business. Once you start up a business you have to keep it running and growing. You can't afford to slip up here and hope to succeed. Many failures come from business owners not having experience managing a business and not getting help when they need it. I don't want to make the wrong mistake Yogi Berra 33. You have poor management skills

One of the most commonly cited reasons for business failure is bad management. Business owners are able to launch their business, but once it is up and running they lack the experience and expertise in finance, purchasing, sales, marketing, production or hiring employees that is needed to make their business work. Business owners who don't take time to get this business expertise or who can't hire experts to help them won't make it. You have to educate yourself. Read. Go online. Talk to people who are running a business. Hire a coach. Take classes. Consider it an investment in the future success of your business. A successful manager knows that a successful business can't be left on auto-pilot. She is able to plan for the future and to make decisions to deal with problems and opportunities as they arise. She knows she has to give attention to the market, competition and customers. She is able to hire good people and then to train them and give them responsibilities. Business owners without business and management skills won't be owners for long. 34. You don't act like the owner

Even if they have the business skills, a lot of small business owners don't want to do any of that “management stuff”. They want to work on making the product or providing the service, or doing only what they like to work on instead of being a manger. You can 't just focus on the fun stuff. The success of your business is going to depend on how well you can manage your entire business, not just the parts of it you like.

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35. You have poor recordkeeping

You need to have some knowledge of bookkeeping and accounting so that you understand what is happening with accounts payable and receivable and with expenses and incomes. This helps tell you what is happening with your business. You also need to keep records, file tax returns, make scheduled payments and do other filings. The government frowns on missed tax payments and filings, and when they do catch up with you it will be expensive and time consuming. You are much better off if you put in a good accounting and record keeping system from the start instead of trying to come back later and playing catch-up. You can find software that will help you. If you don't know anything about this and don't want to learn, find someone who can help. The more you understand about your business, the better job you can do making decisions and running it. 36. You over-expanded

You can wreck a profitable business by trying to grow too fast too soon. Past success doesn't guarantee that you can rush out new products, add new facilities or employees or go into new markets. Some businesses owners want to grow their business as fast as they can so they can calm worried investors or attract new ones. Sometimes the problem is that the business itself has grown unexpectedly and the owner does not have any plans to expand to meet the new increased need. He ends up scrambling to catch up. This rush to expand has caused many businesses to fail because they become financially overextended and can't meet their obligations. A better approach is to slow down. Every business grows at its own pace. You don't want to stifle growth, but you do want to do it smartly and for good reasons based on research and analysis. Not being able to keep up with customer demand is a good reason to expand. You want to be able to say you opened a second store is not. Make sure you have a good customer base and cash flow situation. Once you've done your homework you can identify the areas that call for growth and expand wisely. 37. You procrastinate

There are plenty of tasks in managing a business that aren't much fun. Everyone has their own list, and those are the tasks that usually get put off and off and off. MicroBiz Made Simple

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Those tasks are often pretty important, too. Nobody taxes or paperwork or making cold calls, but you still need to do them. Put off enough critical tasks and you can kill your business. You have to take charge of your time so you don't spend it all on the fun stuff. Prioritize your tasks so do the critical work first. If there are tasks you just can't do, hire someone to do them for you. If you are just plain lousy at time management, get someone to help you or take a class to learn it. 38. You can't decide who is in charge

In a solo business you are in charge no doubt, but as a business grows you can't always take a hands-on approach to managing the whole business. You can have so much responsibility and authority you can't get anything done. You become a bottleneck. If you aren't there to make decisions or take actions nothing gets done. You have to start to delegate. Let others begin to take responsibility and make decisions. Of course you can go too far and delegate so much that you don't know what is going on in your own business. Then you have a problem if an employee or a consultant leaves and you don't know what they've been doing. So delegate but still keep tabs on what is happening. 39. You get distracted

What's one of the biggest distractions in businesses today? Email and surfing the web. It is so easy to start your morning reading email and then moving over to the web for a while that all of a sudden half the day is gone before you get to work. Its the same thing for watching TV if you work at home, or fooling around in the shop or talking with your buddies. How productive are you when you spend half your time fooling around? So, turn off the TV, stay away from the web and email if you don't need them and focus on what you need to do. Make a plan with set tasks. Check during the day how you are doing in meeting them. Limit yourself to short breaks. Check your email at lunch and the end of the day. It'll still be there waiting for you. The same thing goes for the big picture. You need to have the same degree of focus when it comes to what projects you work on. Select one business idea and work on it. Don't move on to something else until you are done. You'll wear MicroBiz Made Simple

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yourself out going off in too many directions at once and end up accomplishing nothing. 40. You're disorganized

Do you thrive on chaos and frenzy? Are you one of those people who has notes and lists everywhere on little scraps of paper and stickies? Is your desk or office a mess? Have your own “special” filing system? Can't find the tool you need because you didn't put it away? Get organized. Your business needs better. Get your records in order. Make a schedule. Put everything away. You'll save time and energy, get more done and be able to find something when you need it. 41. You don't plan for success

Plenty of small and microbusinesses are started with no plans for what to do if they become a success. Occasionally a business takes off far beyond the dreams of the owners leaving them in a quandary. They didn't plan for great success and maybe even don't want it because it will take more work to manage the growing business than they can or want to do. What then? Sell the business? Try to keep going at the old level? Consider adding a partner or hiring a manager to take on the extra load? The point here is that sometimes lightning does strike and businesses do take off, catching their owners by surprise. Think ahead about what you will do with your business if it is a great success. 42. You don't have an exit strategy

You can't go on running your business forever. Plans change, you are ready to retire and your family doesn't want to take over, or maybe you need the cash. How do you get out of the business you have created? How do you get the best price, especially if you are your business's main asset or you are having a fire sale? Maybe it is easier to just close up shop and sell off your assets? Obviously the worst time to sell is when you need to, and best time to sell is when all is going well. The most important thing you can do is to plan ahead. Make sure your records are in good order and that you can show buyers exactly what they are buying. Include your customers and suppliers in your talk. Highlight your cash flow and growth history and potential. If you have special knowledge, are you willing to pass that along? If you have employees, are they going to stay and help MicroBiz Made Simple

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in the transition? The truth is that your business is only worth someone will pay for it, all together or in pieces. Try to run your business as if it is always for sale. Think about what a potential buyer would view as more valuable and pay a higher price for when you make decisions for your business. Plan your exit strategy when you are starting a business, not when you need to leave it, and you'll get more for it in the end.

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Entrepreneurship Successful entrepreneurs share some common traits. They're driven by the idea to make their dreams come true. They are doers, not watchers. They see problems as opportunities. They are optimists, but they are also realistic in setting goals. They take risks, but are do it intelligently. They do make plenty of mistakes, but learn from them for the next time. You don't have to be a great entrepreneur to run a business, but it helps to learn from them. The successful person makes a habit of doing what the failing person doesn't do. Thomas Edison 43. You quit too soon

Give it some time. Many people are serial business starters, especially with online businesses where it is so easy to start a business. If an idea doesn't take off from don't walk away quickly. Think about tweaking your approach and try something different. Or, maybe just be patient. 44. You get too excited

Entrepreneurs are constantly coming up with ideas for starting a new business or expanding an existing one. That is a great trait, but it can leave you with nothing done if you get too excited and chase after them all at the same time or just keep jumping from one idea to another. Nor can you get so excited by a new idea that you don't take time to find out if it will really work before you start to implement it. You need to slow down, do some research and then focus on those that have a chance of working. How do you know if your latest idea is a sure winner? Test it. See if it is worth pursuing as a startup. If you already have a business, see how your new idea fits in with what you're doing now. Compare it with your current business plan and goals. If it doesn't fit, file it away for later. Focus on developing the idea you are working on now before moving on to the next. 45. You are over-confident

Confidence is a trait that all successful entrepreneurs share. They are sure their MicroBiz Made Simple

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idea will work. That's great! You need to have confidence, but watch out for becoming so sure of yourself that you lose touch with what is going on. Don't just follow your instincts blindly. Take a look around. Not every idea is a winner and even the most successful entrepreneurs have failures in their past. If people are telling you your idea is crazy, you don't have to believe them... but it doesn't hurt to take a listen. They might have a point or two in their favor. 46. You don't have any business sense

Some people can come up with great ideas but have no clue about how to carry them out or how to run a business. Many artists and other creative people produce works that would be in demand but they have no idea how to bring them to the market place. If that is you, get some help. Learn business fundamentals yourself. If you can't, find someone who does know how to run a business to help out. 47. You don't change with the times

Nothing stays the same. In fact, the only constant in business is change. Customer interests and needs change. Competitors enter and leave the market, make new plans, and offer new products and services. New technologies come and go. Successful businesses have a plan, but they also stay flexible. They respond to new opportunities and adapt to difficult times. Business owners have to be ready to learn new skills and take on new roles in order to survive. Do regular brainstorming sessions to come up with new ideas for your business. The occasional change keeps you fresh and your customers interested. 48. You don't have passion

Start a business that you are passionate about. Do something that you love doing. That passion will see you through long hours and obstacles and can give you an advantage over someone who starts a business just for the money. When you are passionate you're willing to do a little something more for a customer, to put in that extra hour at the end of the day. It will help you inspire your employees to share your passion for the business. You care and it shows to the people you work with, and to your customers. Plus it is just more fun to do something you like to do!

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49. You burn out

It takes long hours and hard work to own a business. Working at home or own your own doesn't make it easier. Long days with no weekends or days off will start to take a toll on you, your family and yes, even your business. If you go too hard you can start to lose your edge. You become less effective and lose the joy of doing what prompted you to start the business in the first place. Set aside some free time during the day. Take a day off regularly. Your business will benefit from it and so will you. 50. You don't believe

Entrepreneurs succeed because they have faith. The believe in what they are doing and that they will succeed. Think you will fail and you probably will. Positive attitude can overcome many obstacles and shortcomings, especially when it is worked in with some business knowledge and hard work. If you need to do attitude realignment, get with people who are succeeding. Find a coach. Get a little help and motivation and see how much better you do.

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Good luck! There is one last factor that can play a big part in deciding if your business will succeed or fail, and that is plain old luck. Just being in the right place at the right time has let many businesses take off. On the other hand, you can do everything right and still not succeed because of some bad break. Your business could burn down, you could get sick or a flood wipes you out. You can 't control your luck one way or the other, but you can improve your odds for achieving success regardless of what happens by avoiding all the common pitfalls listed here. If the path to success is filled with potholes, go around them. Take positive steps. Plan and prepare for the best and the worst. Most business failures are preventable when you know about them. Learn as much as you can from those who have gone before you and don't be afraid to take action. You'll increase your chances for success and have more fun running a successful business! Do not learn from your mistakes, learn from the mistakes of others so that you do not make any. Sean Karsten ---------If you found this list useful this and you want to keep informed of updates and more small and microbusiness info then you will want to subscribe to my blog at: http://MicroBizMadeSimple.com

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