Taking risks is an inevitable aspect of running a business. As the saying goes, “Nothing ventured, nothing gained.”
While taking chances comes with the territory, that doesn’t mean it’s okay for business owners to be careless or reckless. If anything, the high stakes involved mean business owners have an obligation to mitigate risk and practice due diligence as much as possible.
The truth is every small business owner is only one or two mistakes away from potential failure. While accidents happen and mismanagement is unavoidable, certain mistakes are hard to come back from - if not impossible.
With this in mind, let’s take a look at seven mistakes that can tank your business:
Governments around the world are cracking down on the gig economy. Business owners relying on freelancers and independent contractors may discover the government recognizes these workers as traditional employees. Fines and penalties may follow. The solution - especially for companies with a large percentage of overseas workers - is to work with a third-party payroll service. Doing so means hiring foreign independent contractors won’t come back to haunt your business. It also means business owners can worry less about pesky payroll problems.
When it comes to business success, reputation means everything. Companies that mislead customers, create a toxic work environment, and do other shady and unethical things will not last long. People - whether they’re employees or customers - never forget a thing like that. No matter how tempting it might seem, never, ever, allow your company to stoop so low as to cheat and lie in order to churn a profit. If you have to be unethical to succeed, you shouldn’t be in business.
When it comes to business accounting, ignorance is no excuse. In other words, just because you’re not a natural whiz with numbers doesn’t mean it’s okay to let your bookkeeping go by the wayside. Poor accounting is practically an act of self-sabotage. It’s like if your doctor gave you test results he decided to make up on the spot. It does nothing but conceal the existence of a ticking time bomb. Sooner or later, bad accounting will bubble to the surface, revealing financial losses your company will struggle to overcome after going so long without knowing they exist.
Bad accounting almost always leads to tax problems. That’s because Uncle Sam (or your country’s equivalent) will come calling once they detect the potential for accounting inaccuracies. The added business tax owed, plus fines and penalties, can easily cripple even the most established of enterprises. The government may even go so far as to shut your business down due to unpaid tax debt.
Few things prove as inspiring as great leadership. With this in mind, the apparent absence of leadership can cause employee morale to plummet. Business owners who spend more time away from their company than they do getting involved with its operation run the risk of having the bottom fall out of their venture without them even knowing.
Another sign of impending business failure is poor communication between departments and employees. While there’s something to be said for keeping teams separated from each other, a prolonged sense of being left in the dark can lead to diminished morale among staff. The best way to thread the needle is by arranging weekly updates - either through email, meetings, or both - to ensure everyone stays on the same page, even if they’re not privy to all the content on the page.
Do you want your company to operate the best way possible? If so, listening to middle management is essential. Business leaders that get defensive whenever they’re given less than ideal news are making their organizations weaker. Sticking your head in the sand will never solve the problem. When bad news hits - and it eventually does - business leaders can either react with practical problem-solving solutions or act like nothing's wrong. One road leads to business success and the other heads to failure.
Taking risks is one of the costs of doing business. But unforced errors and bad management practices are not risks - they’re hazards - and business owners have an obligation to eliminate them. Failure to do so will almost always lead to business failure.
Julie Steinbeck is a freelance writer from Florida. She enjoys covering topics related to business, finance, and travel.