Common Mistakes Small Business Owners Make

We started our business in 2014. Our company has been working for 1.5 years (on the date of publication) in the IT industry, and we’ve made a lot of mistakes. To prevent common mistakes small business owners make, we’ve collected our experience in notes to avoid such mistakes.

Common mistakes small business owners make. First-year notes
datarockets founders present project at “What the Hack” hackathon on October 2014

Business

Building the business of your dream takes time

We thought that we could build a small company with a remote team, transparent and stable processes, and great culture in a month—or in a year, at the most. It was a mistake, we have never been so wrong. It takes a lot of time to tune every process step by step. Everything takes time. And sometimes that’s really depressing.

Don’t be mad because of that. Be patient, take small steps, and remember that you will not build the business of your dreams in a just a little time.

Automate as much as possible

Some tasks take a lot of time and energy. Even ordering coffee, tea, or stationery for the office may take a week if you don’t have any process for that. We automated some of our processes with Trello and Zapier, which helps us save time.

Set up processes and make sure that everyone follows them. Delegate tasks that can be done by others. Don’t try to control everything, or you will end up with a bottleneck.

Development of your product will be expensive

When you work on projects for your clients, you probably dream about your own product. Just remember that it’s easy to invest a lot of money and get nothing in return.

People should work on a product full-time. Don’t create a team that consists of only junior developers. Someone should manage tasks and be responsible for delivering the results on time.

Don’t forget about marketing and product support. Be realistic—it’s expensive. It’s popular among small businesses to use some growth hacking tips. Using them you can cut your marketing budget or even launch a successful product with 0$ spent on marketing.

Money

Customers may not pay

You can complete your work perfectly and on time. But the customer may not pay you. It is a business, and nothing can guarantee that you’ll receive your money.

Don’t repeat such mistake, improve your agreement templates and take prepayments to minimize such risks.

Invoicing is a process

If you don’t remind people about payments, they may think that you don’t need the money right now and may delay payment. It may be the most common mistake business owners make in their first year.

When sending an invoice, ask about the payment date. Remind customers a day before the payment is due. Have a system in place in case of payment delays. Don’t be afraid of pinging the debtor every day.

Don’t work for free

You don’t help anyone when you are working for free. Your quality of work will become worse, because “it doesn’t matter, this customer doesn’t pay anyway.” If a client has accumulated debt, don’t accept offers to finalize things. It will not help the customer to pay his or her due balance.

If you have free time, it is better to invest it in company development.

Don’t create discounts

Your rates should be justified. Only when you charge the predetermined rates can you pay taxes, salaries, and develop your business further. Don’t establish any discounts; otherwise, you will not be satisfied with your work, and this leads to poor-quality products, as described in the previous note.

Sales

Sell continuously

It’s easy to forget about sales if you are a small business and have enough projects at the moment. However, you will suddenly find yourself on the chopping block when one of your projects ends suddenly for some reason.

Allocate time and people to work on sales every day. Formalize this process.

Stay in contact with past customers

Returning customers and recommendations are the most effective sales sources. As a small business owner, you need to allocate enough time to talk to your contacts: follow them on Instagram and Facebook, react on their updates and share your updates as well, schedule meetings and have lunches when you’re in their area.

People

Make progress visible

We believe in remote and async work. We were saying, “Hey, we provide the opportunity to work remotely and async,” but we failed. Move communications to public chats, which will remind everyone of your commitments and progress. Make your progress visible and encourage teammates to do the same.

Send out a public chat detailing what you’ve just done, what you plan to do next, and what obstacles you may encounter. Set up notifications from your task tracker to feed into the chat.

Everyone wants to earn more money

Work with employees personally to prepare their development plan and responsibility milestones. Completion of the milestones should lead to salary raises. Pay for the work the employee actually performs and the responsibility he or she actually takes.

Don’t hesitate to fire people

If you don’t like how someone works, don’t give them that 3rd chance. To make firing more comfortable, formalize this process:

  1. Give feedback and prepare milestones.
  2. Warn the employee that if the goals are not met, he or she will be fired.
  3. Come to a mutual conclusion about the results.

Don’t hire friends

It’s a pleasure to work with friends as colleagues. Sometimes business owners think it’s a good idea to hire someone they know well. Unfortunately, it’s hard to work with friends as employer and employee.

Stay in contact with employees

Give feedback to employees often. Discuss mistakes and learning plans. Ask for feedback from them. Set up a process for that.

Write a playbook

Describe your values in one document. Describe the human qualities you expect from all the people you work with. Don’t hire people who don’t believe in your values.

Projects

You don’t control products if you work as a dedicated team

Even as a business owner you have no influence on project development if you don’t manage that project. Sometimes we see good products with a great business idea, but they turn out unsuccessful because of bad decisions we don’t have a say in.

Give priority to the projects you can manage.

Outsourced managers don’t care

Outsourced managers don’t think about the product and work based on the CYA (Cover Your Ass) rule.

Management is important

Management is not always related to managers directly. But someone should oversee tasks, development risks, and records of work performed for a client. Allocate time for that kind of work.

Don’t create positive expectations

Nobody likes when their expectations differ from reality. Be careful when talking about estimates and possible delivery times. We prefer to overestimate something and then make clients happy when we finish the app ahead of schedule/budget than disappoint them and miss the deadline/get out of the budget.

Small fixes cost a lot

Even a small change or fix takes a lot of time and energy. Usually, you’ll decide to do it in unison with your major project. And usually, you waste a lot of time switching between the tasks and communication.

Don’t repeat this mistake.

Show progress to the client

Write a task description using words that the client understands. Present new features personally, answer questions and ask for feedback. Don’t send a changelog as your text.

common mistakes small business owners make
Our client Daniel had been working from our office for a week

This is our list of common small business owners mistakes. We took them after a year of having our own business and have collected more insights since then. Let us know if it’s worth sharing.

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