Common Small Business Slip-ups

Common small business slip-ups

Owning your own business can be rewarding, but commitment, discipline, acumen and capital are important.

 

As a small-business owner, Theresa Gallup has learned "you can't do it all. Hire the professionals."

Hire a professional accountant, hire a Web designer, hire anyone who can fill in the blanks you can't.

You can learn these skills, but the time it will take to learn them and the results are often not worth it, said Gallup, who owns a home-based business, Kimono Designs.

While the majority of small businesses fail in the first five years, some are quite successful. If you're thinking about starting a home-based business -- whether it's a lawn company or crafting jewelry -- there are many things to consider. These professionals share their tips for success and how to avoid common mistakes.

Early mistakes

The advantage of a home-based business is you have a lower entry cost because you don't need to rent or build a space for your business, said John McKearney, counselor for Service Corps of Retired Executives, a partner of the Small Business Administration that offers free counseling for small businesses.

"If I look at the reason for small-business failures -- and this is all small- and home-based business ... the major thing people do is they underestimate the need for capital," McKearney said.

According to the SBA, more than 50 percent of small business fail in the first five years.

The first three years were rough for Gallup.

"I lived extremely meagerly because all the money I made I poured back into the business," Gallup said.

She advises having three years of income to sustain yourself if you are serious about your business.

Home-based businesses have their own challenges, said Mike DePue, business resources librarian at the Library Center.

One of those challenges is time management and discipline, he said.

Mary Hamilton understands this firsthand.

Hamilton runs Custom Art and Design out of her home. She paints but also creates cards. Last year was a hectic year personally, and she wasn't as committed to her business. As a small-business owner, you tend to think you can take today off or this week off, she said, but success requires discipline.

Nena Potts, a Rogersville jewelry artist, said one of her earlier mistakes was trying to "reinvent the wheel" with every piece of jewelry.

She learned to find designs that worked, then tweak and redesign.

Keep your business as versatile as possible so you don't have all your eggs in one basket, Potts said.

She does custom work, shows and wholesale to ensure income all year, instead of seasonal work.

Another thing to decide is how you will accept payment.

Taking credit cards is a real maze to get started, but it's been a big part of Gallup's business.

"But there is a fee you pay for that," she said.

If your product costs more than $20, you should consider taking credit cards, she said.

Another thing to consider is inventory, said DePue.

"How much is the right amount? Any inventory that sits around is money that sits around. 'How much do I need to keep the business going but not sitting on the shelves gathering dust?'" DePue said.

A business plan is a must, McKearney stressed.

It should include a financial forecast, marketing plan, a checklist of how much money is needed, insurance, etc.

Take advantage of resources for small businesses, such as SCORE or the Small Business Administration.

"I went to SCORE and they put on a one-day program on how to set up a small business, which was extremely helpful to me," Gallup said.

Before you start a business, make sure you understand the industry, who is succeeding and why, McKearney said.

"The fact that you can be a fantastic quilt maker doesn't mean you can be successful marketing quilts," he said.

Marketing, networking

One of Nena Potts' earliest mistakes was not knowing her market. She found her niche through trial and error.

You have to target your marketing to the right audience, DePue and McKearney echoed.

Some people spend so much time marketing, they don't produce a quality product.

"On the other side of the spectrum, some people think if their product is quality enough it will sell itself. Any of these problems can sink a business," DePue said.

A general product might be advertised in a newspaper or radio, but a niche product -- such as upscale antiques -- needs targeted advertising.

Join trade organizations, Gallup suggested.

Network with other businesses and through the Chamber of Commerce, said Mary Davis, CEO of Missouri Enterprise, which works with the manufacturing industry.

"It gets their name out there and helps them keep up with what's going on in the business world. Sometimes when you are isolated from others, you don't recognize what others are concerned about or talking about," Davis said.

And in this day and age, a Web page is important, Gallup said.

"It's like having a constant brochure out there. More people find me because of that ... it gives you credibility," she said.

When you need work or services, hire someone local, Hamilton said.

"It's surprising how much more you get from using local people. Information, friendship," Hamilton said.

And don't be afraid to ask questions from professionals or anyone you meet with experience, Hamilton said.

records and Regulations

Make sure you separate bank accounts for business and personal expenses and keep separate records, too, Davis said.

Keep all receipts and either have an accountant or a computer program that helps you track your expenses.

Before you open your business, meet with an accountant who specializes in small businesses so you know what you need to track, Gallup suggested.

Make sure you understand city, county, state and federal taxes and regulations, DePue said.

Insurance is an important factor that a lot of home-based business owners neglect.

"A lot of people don't realize this, but a lot of homeowner policies exclude running a home business. Some insurance policies, the fact that you start a business and don't report it to them, that voids your policy. Talk to your agent," McKearney said.

You may have to hunt for insurance, Gallup said.

Most of these experts reiterated the fact that you should expect to work harder than you expected to work.

It's not an easy time to start a business, said Potts.

She followed her passion, but thinks people are better off finding a need that isn't being met and filling that niche.

If you are following a passion or hobby, you need to remind yourself this is business now.

"They have to be able to tell themselves this is no longer a hobby," DePue said. "This has dollars and cents implications for my life or my family and I can't treat this as a hobby any longer."

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