The Paycheck Protection Program ends on August 8, 2020. We will stop sending applications to lenders on August 7, 2020 at 10:00 PM EDT/8:00 PM MDT. We anticipate that an extension to the deadline for the Paycheck Protection Program may pass in the coming days. Lendio will continue to accept applications in the interim and, if Congress passes an extension, Lendio will submit your application to our lenders when the Paycheck Protection Program resumes.
Mar 24, 2020

7 Habits of the Perpetually Broke Business Owner

Running a business can make anyone’s stress levels rise. In a Bank of America survey of 1,001 small-business owners, 41% of respondents said managing the business is by far the biggest cause of stress—more so than raising children (9%). 

Money is often the leading cause of stress, and bad habits typically cause money problems for business owners. If you’re feeling stressed and overwhelmed with the financials of your business, consider these 7 habits that could be sabotaging your success. 

1. Cutting Costs Without Considering Their Impact

You will find that many business owners make decisions that are “penny rich but cash poor,” meaning they save in the short run but lose money in the long run. In a Planet Money episode, one restaurant owner wanted to add an extra table to his crowded New York restaurant, thinking a new table would bring in more money. The reality was that he needed to take away a table because customers would then feel more comfortable and spend more—raising profits as a whole.

We often think that the best way to increase revenue is to add. Whether that’s adding a new line of products, additional services, or some other investment into the business, we believe that we can fix a money problem by adding more expenses and resources. However, many times we need to practice addition by subtraction.

Learning what to spend and what to cut takes time and an innate understanding of your customers and industry. Make sure your changes will help your employees and customers in the long run, not just your bank statement in the short run.

2. Keeping Messy Books—or No Books at All

A lot of people avoid going to the doctor for fear of what they might hear. This “don’t ask, don’t tell” mentality is also how many owners feel about their books when business is not going well. As businesses start to lose money, they tend to turn a blind eye to their finances. 

They don’t want the stress of seeing their debts and focus instead on other aspects of the company. However, this practice is like throwing water on an oil fire because your books are one of the best resources for business owners to make better strategic decisions.

Clean and accurate bookkeeping can help you find waste in overscheduled employees, forgotten client invoices, or other ways to cut expenses and increase revenue. If you are in trouble, stay focused and keep your books in order. 

3. Ignoring Changes in the Market

You spent weeks and months honing your business model and developing a successful plan before launching. You might have even enjoyed many years of growth and profitability.

However, consumer demand and other market trends can lead to changes in your business, and if you’re not willing to adapt, you’ll struggle. 

Perpetually broke business owners often focus on their company and strategies without investing enough time into external research and analysis. Even worse, these same owners will continue the course regardless of market or consumer changes. 

Would you rather be wrong and profitable or stubborn and broke? 

Successful business owners understand the importance of adaptability. They’re willing to make strategic changes based on feedback, financial trends, and other market factors that indicate a need for it.

4. Starting Too Many Projects at Once

The other side of the pendulum from managers not keeping an eye on the market is the business owner who has a habit of chasing the “next big thing.”

These business owners will start projects before finishing others. They’ll spend time, money, and resources pursuing multiple avenues and projects without truly being able to invest the care and focus needed to do any well. 

While chasing the next trend, they neglect the core competencies of their businesses and miss out on increasing profitability through more efficiency.

Consider how many new ideas and projects you and your team can handle. You will have more success with one carefully-researched and executed project than several half-baked ideas. 

5. Micromanaging Team Members

When times get tough, some business owners dig into the daily operations and start to micromanage staff. They believe that the best way to increase profitability is to keep a closer watch over their employees and the minutiae of their businesses. However, this is far from the truth.

Most businesses cannot operate with one person dictating everything. Micromanaging will often drive away your good employees, thus increasing turnover costs. It’s also unrealistic because you’ll create bottlenecks in your operations.

Rather than micromanaging, focus on big picture decisions that have a more significant impact on the success of your business and implement processes that empower and incentivize your employees.  

6. Forgetting to Train and Grow Employees

A good manager doesn’t just avoid micromanaging—he or she actively works to train employees and make them more responsible and independent. Roughly 85% of employees say that job training is important to them. They believe it improves their job performance and gives them more self-confidence to make decisions. 

Not only will training your employees make them more effective, but it will also keep them around. Employee turnover is a serious issue for many businesses. Employee turnover leads to more stress for your current staff, and it has a direct and profound effect on your bottom line. SHRM suggests that it can cost 6–9 months’ salary on average to replace a salaried employee.

If you’re neglecting training and employee growth opportunities, you should change that habit and begin investing in your staff.

7. Not Taking Time Off

We get it—running a business is an around-the-clock job. How can you take a break or vacation if you want to turn your business around? Well, you need to take breaks, not just for your sanity, but because it’ll actually make you more productive.

In fact, business owners should take more time off than most employees because of the increased stress that comes with running a business. Experts recommend taking at least a week each quarter (4 weeks of vacation per year) to relax, reboot, and regain your strength to push on when you get back.

Find a Balance

The vast majority of the bad habits on this list have to do with a lack of balance or moderation. Closely managing employees is a good thing until it becomes micromanagement. Adjusting to change is a smart business practice until you take on too many projects at once. By balancing your goals and ambition with realistic expectations and healthy choices, you can avoid becoming a perpetually broke business owner. 

 

7 Habits of the Perpetually Broke Business Owner

About the author

Derek Miller
Derek Miller
Derek Miller is a writer specializing in entrepreneurship, small business, and digital marketing. His work has featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp. He’s currently the CMO of Smack Apparel, the content guru at Great.com, and a marketing consultant for small businesses.

Comments

Get your small business loan today.

$
Applying is free and it won't impact your credit
Already have an account?  Sign in
Phone Icon

Give us a call
(855) 853-6346

Monday - Friday | 9am - 9pm Eastern Time