Starting your small business was no easy feat, and keeping day-to-day operations afloat is no walk in the park either. That’s why you work tirelessly to juggle your responsibilities and do what’s best for your business: you’ve invested capital, energy and sleepless nights into your venture and you want it to succeed.
As USA Today reports, approximately 20 percent of new businesses survive beyond their first year, and about half make it past five years. Just one-third make it beyond a decade. You want to be among the survivors. What can you do? To start, avoid these three mistakes that could cost you your SMB.
Forgetting Business Insurance
Forgoing business insurance in this day and age is a real gamble. The U.S. Small Business Administration points out the financial impact of litigation on small businesses, citing a study that showed legal costs ranging from $3,000 to $150,000 and adding, “Small business owners felt that they had to ‘recoup’ these losses by cutting operating expenses, acquiring new customers or expanding their services to existing customers.”
In other words, what starts out as a normal day at the office can lead to a lawsuit from a customer, an employee or a competitor. It’s a mistake to operate without the right amount of professional liability, general liability and workers’ compensation coverage, unless you can somehow handle a triple-digit court bill on top of your regular operating costs.
Making the Wrong Hires
When you’re bringing a new team member aboard, leave yourself enough time to create engaging job postings, interview a variety of candidates and make a smart decision. Hiring in a pinch only leads to poor employee fit and high turnover. Sure, at face value it seems as if you’re hiring for a specific position. But you’re also building your company culture, one addition at a time.
As one CEO writes for Entrepreneur, culture “is about shared values and beliefs, the common ground of every discussion and the bigger reason why you are all working on the same idea.” Avoid small-picture hiring and make sure you’re putting together a skilled, cohesive team that can go the distance. Otherwise, your SMB just might unravel at the seams if your employees decide to jump ship.
Confusing Profit for Cash Flow
When you’re in the thick of running your business, it can be difficult to step back and take stock of the financial minutiae. But it’s important to differentiate different kinds of income from the get go. For instance, mistaking profit for cash flow can sink your SMB and halt your operations if you suddenly don’t have enough money to pay your bills, buy supplies or compensate your staff on time.
Like Investopedia notes, a business may be profitable overall, but the money may be tied up in hard assets or accounts receivable for weeks or months. There’s no such thing as writing an IOU when you run a business; you need to have a cash flow to handle payroll and short-term expenses. Failure to differentiate these income streams could land your SMB in a bind.
To avoid these three mistakes, make sure to invest in financial planning, smart hires and business insurance. CoverHound can help you find a policy that fits your growing SMB. Learn more today!