6 Small Business Pitfalls, and How to Avoid Them: PART ONE

Photo: Nora Dunn

Whether you have been downsized by the corporate world and are going out on your own, or are “retired” and opening that business you have always dreamed of running, or are simply filling a niche with your special idea and skill set, the world of small business is vast and rife with pitfalls.

The opportunities are as great as the hazards, and no matter which way you slice it, running a small business takes a lot of hard work and tenacity.


But it doesn’t have to be all bad: by knowing where the typical traps lay and how to avoid them, you can soar to great heights with your business.


In this, the first of a two-part series, we will examine four of the six ways you can avoid some of the largest pitfalls any business owner can fall into. Navigating through these entrapments can mean the difference between success and failure.



Get a Jump on the Learning Curve

When starting out in your new business, you often have to do it all yourself. And a lack of management experience (outside your area of expertise) is a recipe for disaster if you don’t address it properly.

A tradesman I know was recently downsized and decided to seize the opportunity to work for himself. He figured that he knows the business – he has spent a lifetime working in it – and so he was astonished when he floundered and ultimately failed at his own craft. What he didn’t realize is that running a small business is about so much more than performing the service or providing the product in question; you have to manage the books, file taxes and understand your write-offs, meet legal requirements, provide exemplary customer service, collect debts, pay employees, and so on.

And even if you can accomplish all the tasks above in addition to the daily income-generating work, what will your life look like if you have to learn it all – the hard way - as you go? You probably won’t have much of a life at all, you will work back-breaking hours, and with every day of maintaining this level of activity, it will be even harder to delegate these tasks later on (we will get to that shortly) since they probably weren’t done optimally to begin with.

If you run your business in an off-the-cuff manner without at least seeking management training and a grounding in the basics, you will run the business right out of business. Training doesn’t have to be expensive – many local government offices offer free courses to help encourage new entrepreneurs. It will be well worth the time (and money) spent; it could be the difference between solvency and bankruptcy.



Learn to Delegate

Eventually – and possibly right from the start – you will have to delegate if you want your business to grow (or even just to succeed). Wearing every hat and being everything to everybody will quickly tire, and if you survive it without burning out, you may likely lose sight of why you got into business for yourself in the first place.

Learning to delegate involves two crucial steps:


Trust Your Employees and Contractors

You simply have to trust that you are paying the right person to do the right thing. They may not always do it your way, but if they get the job done, let it be. If they need some extra guidance to get it right, then provide it patiently and wait for the results. And if they still can’t do what you need them to do, find a new employee or contractor. Yes – your business may stumble in the process, but it is all part of the fabric of entrepreneurship; pick yourself up and keep on going. The big businesses of the world didn’t become so from one person doing everything themselves.

Your clients will indeed understand if you pass the management of their accounts on to an employee. Assure them that you are still at the helm and are there to help them, but that in order for you to provide exemplary service, you can’t always be the one to answer the phone, or send their statements, or even provide the actual service (depending on the level of delegation you embrace).


Phase Yourself Out of the Business

It may seem strange to be discussing how you will phase yourself out of the business before you are even out of the starting gate, but this is a foundational principal of good business. Your aim should be to structure it to run smoothly – with or without you. Even if you don’t have ambitions of being the next huge conglomerate, there will be times when you will want to take time off, or may fall ill, and your business should not suffer as a result. The ultimate indicator of success in business is if you can step away from it and continue to enjoy a passive income from a distance.



Cash is King. So Avoid the Cash Crunch: Buy & Manage Sensibly

The amount of expenditures when starting a business is overwhelming. Knowing this, there are ways to engineer your business so that you don’t experience the cash crunch. The last thing you need is to default on loans and have a business that is just getting off the ground ripped out from under you.

A big temptation when getting started in business is to insist that you need a whole pile of items that you don’t actually need. You absolutely “must have” the top of the line this, or super-expensive that, or you may drastically over-estimate what you will sell and how much of it will move off your shelves. Some ideas:

  • That bulk sale for a stock item that you don’t yet need replenished may be a great deal, but if you already have stock that isn’t flying off the shelves, resist the urge to stockpile. It’s a surefire recipe for a quick cash crunch.
  • Lease equipment instead of buying it, especially if you only need it for short-term use, or if it will be obsolete by the end of the lease term. Although leasing isn’t always the most financially effective way of doing things, having cash in a fledgling business means increased solvency.
  • If you have stock that just isn’t moving, be ruthless: get rid of it by discounting it more deeply than you may wish to. As long as it sits on your shelf, your bills won’t get paid.
  • Avoid state of the art equipment. Choose the frugal route and buy second hand at auctions or through online or newspaper ads. You can save a bundle of money and still have all the functionality you need.



Don’t Forget About Tax!

Income Tax, along with various mandatory employer-paid benefits, can turn year-end accounting into a shocking experience if you haven’t made proper allowances. Cash in hand does not translate directly into profits for pockets.



Next time, we will look at the two remaining small business pitfalls – and they’re doozies! For now, put the above into practice and you’ll already be ahead of the small business game.

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Guest's picture

We just sold some office furniture for cheap. It's hard to get rid of used furniture. So you can definitely find great deals for used furniture to buy.

Guest's picture


To piggyback on your "cash is king" comment, we should extrapolate that a bit further and state that capitalization is king. The single biggest reason for entrepreneurial failure is misjudgement of capital requirements and inability to secure favorable financing. Most entrepreneurs find that their most important job is not running their business, but trying to find the next source of financing. In today's contracting credit environment, this unfortunately will become more difficult.

Guest's picture

I recently stepped into my first postion of managment. I am a project manager for elearning projects. Trusting was one of the most difficult things for me to learn. Up until recently I did every step of the project myself. Now the projects are larger in scope and require many more people. My fear of the project growing in ways that I can't control took a while for me to get used to. I think I'm getting it now.

This is good advice! Thanks for writing.


Guest's picture


for some real insight

Guest's picture
mike k

in business, don't trust anyone. the minute you trust someone, is the minute you can't trust them. if they know you trust them, they will find a way to abuse that trust, whether they do it intentionally or not. you can RELY on people, but you can't trust them. do so at your own peril...

Guest's picture

Great article. Pitfalls can really be avoided. I work for a man who went into Los Angeles after the Rodney King riots to help rebuild the commmunity by teaching free classes on how to start a business. Well since then it has grown into a non-profit organizatoin and the course has moved online. It's now a 14 session course authored by 26 business experts. It's focus is to help people avoid "avoidable" mistakes. The organization My Own Business, Inc. (MOBI) does rely on donations and sponsorships and sales of products like the textbook and a graded Certificate Course but this allows MOBI to continue to provide the course absolutely free. It even includes a business plan template you can download to your own computer and 2 sample business plans. Check out the website if your are at all thinking about starting a business or already have one but want to develop it further.

Guest's picture

Please visit my homepage and give some ideas. I would really appreciate any feedback. My goal is honest ideas and suggestions.

The above article is good and has some informing ideas. I would like everyone's advise here.

Thank You