Go ahead and take some notes – there's no need to repeat these small business mistakes.
Experience is a very good teacher, and every small business owner learns some lessons the hard way. But you can avoid many hassles and headaches by learning from the mistakes of other entrepreneurs who have already faced the same issues you’re facing.
Here are five lessons small business owners have learned that they wish they had known when they first started:
“If you can avoid making these five common mistakes, you can focus on helping your company grow.”
Get the correct business insurance coverage from the start.
Failing to determine your general liability insurance needs up front may cost you big and even sink your business, according to Bryan Clayton, CEO of GreenPal, a company that connects consumers with lawn care companies.
In 2009, GreenPal was audited by the Department of Labor, which determined that the company’s crew leader managers had to be paid an hourly wage rather than a salary. The company suddenly owed additional overtime to 80 employees, and the business was hit with a $450,000 fine.
“If we had had the proper insurance, we would’ve been covered in this nightmare that almost killed our company,” Clayton says.
In his case, he should have had employment practices liability coverage.
He advises other small business owners: “Don’t be penny wise and dollar dumb. Get the proper insurance coverage in place before you scale your company.”
Think twice before hiring personal friends and family.
It’s extremely common for small business owners to hire employees from their own personal circles, bringing on a neighbor as the receptionist or a favorite uncle as the sales rep.
In 14 years of running his creative design agency Porchlight, Greg Corey says he has made “tons of mistakes,” but the one he’ll never make again is hiring family or friends. He hired his best friend, a former college roommate he’d lived with for four years. One day, his buddy quit and walked out with no notice.
“It put the entire team in a difficult situation as he was our most seasoned employee,” Corey remembers. “It also put a dark cloud over the office because employee No. 1 just walked out the door.”
Worse, Corey never found out why his friend left – and the two haven’t spoken since that day. Corey speculates that the boss-and-employee dynamic might have strained the friendship and caused unspoken tension to build until it finally hit a breaking point.
“It still haunts me today,” he says.
[Photo: Jennifer Burk/Unsplash]
Take time to make sure a prospective employee is a good fit.
“Our biggest mistake has been hiring the wrong person for a role,” said Steven Benson, founder and CEO of Badger Maps, a route planning tool for sales reps. A candidate can look great on paper and seem like a good fit in an interview, but then they can be completely wrong once they are in the position, he says.
Now he thinks first about which skill set someone needs to perform the job and also what characteristics will make someone a good fit for that particular role.
He says: “That is way more important than a lot of the things that we often screen for when we are hiring like pedigree and experience.”
Help good employees grow with the company.
“Hiring an awesome and talented team is only effective if they stick around long enough to benefit your business,” says Matt Bentley, owner and founder of SEO company CanIRank.
His company learned the hard way how expensive and exhausting it can be to hire and train a new employee, only to need to hire a replacement when that person quits. Studies show that replacing a salaried employee costs the business an average of six to nine months of that employee’s salary.
To decrease turnover, Bentley began to focus on his employees’ long-term career goals, providing them with opportunities to meet their goals while staying with the company.
“During the hiring process, we focus as much on how we can help their career as we focus on how their talent can help us,” Bentley says.
The company now puts an effort into encouraging employee growth and offers an array of bonuses to reward successes.
“By doing so, we have noticed a huge uptick in our employee performance, satisfaction and retention,” he says.
[Photo: Igor Ovsyannykov/Unsplash]
Be ready to capitalize on media coverage of your company.
When hyperlocal dating app Cheekd got featured in The New York Times five years ago, the influx of internet traffic crashed the company’s site.
“It was the biggest day in the history of Cheekd,” says founder and CEO Lori Cheek.
Once the company fixed the problem and had the site operating again, orders flooded in from all over the United States. However, the company uses a recurring subscription model, and the web developer had made a big mistake, inadvertently turning off the feature that was supposed to capture new users’ credit card information so they could be charged regularly.
“With hundreds of new signups, we lost nearly $30,000 from this simple mistake,” Cheek says.
The lesson: Expect media coverage to bring in a flood of new customers, and be sure you’re ready to handle it.
As a small business owner, establishing good business habits is important right from the start.
And if you can avoid making these five common mistakes, you can focus on helping your company grow – and spend less time and money dealing with setbacks along the path to success.
This article was developed in partnership with The Hartford. Check out their blog, Small Biz Ahead, a destination where you can discover insights and advice to help you manage and grow your small business.
[Top Photo: Rob and Julia Campbell/Stocksy]
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