4 Expensive Lessons I Learned When I Started a Small Business – The Motley Fool

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These common mistakes can cost you in both time and money. Here’s how to avoid them.

Key points

  • Writing a business plan is one thing, but you also need to lay the groundwork before you launch your business.
  • Your team is the backbone of your business, so make sure you look after them.
  • Ruthlessly cutting costs will give you more time to build a profitable business.

I started my second small business about seven years ago, and it’s fair to say I learned a lot of things the hard way. I run a small local newspaper, but many of my experiences will resonate with small business owners in any industry.

Hopefully, these lessons will help you avoid making the same costly mistakes as I did.

1. Lay strong foundations

I spent a good amount of time putting together a business plan and making projections. But I didn’t do enough groundwork, and the first year of the business was tougher as a result. We launched the newspaper in a rush because we landed an exclusive interview. On the plus side, it pushed us over the starting line. At the same time, it meant we spent a long time playing catch up.

Here are some of the things you can get done before opening:

The reality of starting a business is often a long way removed from what you read in business books. You will never feel totally ready to launch, and you don’t want to spend so long planning that you never actually do anything. However, once you start, not only will you barely have a spare second, you may also be paying employees and rent. Put simply, your monthly costs will skyrocket.

2. Take time to find the right people

My hiring mistakes cost me considerable amounts of money and time. One of the consequences of launching too quickly was that I then hired out of desperation, a common mistake. I hired someone to meet a short-term need without creating a clear job description or being sure the person bought into our mission and vision. It wasn’t fair to them or the rest of the team.

As a small business owner, I’m not able to pay huge salaries, and I rely a lot on my ability to create an environment that people want to be part of and contribute to. A negative person who doesn’t pull their weight can have an outsized influence on a small team. For example, people wonder why they should work hard when one of their coworkers isn’t contributing. You can put a lot of time into trying to fix the problem through extra training, but there’s only so much you can do if their expectations don’t align with yours. And firing people is also costly and time consuming.

3. Become a cost management ninja

Depending on how your company is financed, you have a finite amount of time to break even and start generating a profit. The bigger the window you can create, the better your chances of success. That means being ruthless about cutting costs, and always keeping your objectives at top of mind. Make sure you review your spending every month and religiously chase late payments.

There are all kinds of tactics you can use to cut costs, and no single solution will be right for everybody. For example, you might save time and money on transport by pushing for more video calls rather than face-to-face meetings. But if those relationships are fundamental to your success, that may not be helpful. Switching to lower-cost suppliers could make sense for certain products. But if you compromise the quality of your product, you could lose clients.

Another place you may be able to cut costs is subscriptions. I’m certainly guilty of thinking, “It’s only X dollars” and signing up for services I don’t truly need. Those X dollars can quickly add up. Try to evaluate new services in terms of the cost versus the time you save. Splashing out on payroll software might be worthwhile if you spend considerable amounts of time managing employee paychecks. But not if it only takes you an hour to do.

Personally, the one area where I relax my spending is with my team. I don’t mind paying for training, buying people coffee, or taking the team out for lunch occasionally. Like everything, it’s about balance, but employee retention is extremely important. If it costs a little more to keep people happy, I think it’s worth the investment.

4. Don’t waste time on things that don’t really matter

Focus is crucial. It’s very easy to try to do everything, and everybody will have hundreds of good ideas and suggestions. The trouble is that you only have limited time, and it’s easy to overstretch. Or worse, do things badly and damage your reputation. We learned that it is better to do one or two things well, especially at the start.

To give you an example, our print newspaper definitely needed a website, so we built one. But contrary to popular logic, we didn’t need to make videos or build our social media presence — at least not initially. Sure, video and social media are increasingly important. For us though, they didn’t generate revenue, and we weren’t able to do them to the same standard as the print edition. In fact, putting time and money into additional channels that we couldn’t maintain or do well would have damaged our brand.

Bottom line

Running a business is not easy, and you’re sure to make your own mistakes along the way. One of the biggest lessons I’ve learned is that things will go wrong. What matters is how you deal with the problems as they arise, as that’s what will ensure your business succeeds eventually.

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