Top 11 Mistakes Business Owners Make
– Mistakes Business Owners Should Avoid –
Two businesses can look identical, but have very different valuations. We look at 400 different qualitative aspects of the business, and provide a prioritized list of issues to make a better business. Here’s our own top 11 list of the most common mistakes business owners make:
1. They don’t have a business plan. Or, if they do, they waste time doing one, and then sticking it in a folder.
2. Big data? How about bad data? Bad data means the owner over-estimates future revenue, under-estimates future expenses, and fails to recognize they’re about to have a cash flow implosion.
3. Picking the wrong business partner, and not having a solid shareholder agreement. One out of two marriages in this country don’t work. I think it’s higher for those who go into business together.
4. Not having a good balance of customers. if you have way too much dependence on one or two customers, who would want to purchase a company with such a risk of survivorship?
5. Lack of financial controls. Hope is not a strategy, and trust is not a financial control. I have a client who trusted their CFO, and over eight years the CFO embezzled $5 million.
6. Making business decisions solely on income tax implications. Also, mixing the business and the personal together, so you can’t even tell if you’re making money or not, because you have all your toys and vacations buried inside the business.
7. Failure to vet and select the right advisers. And probably most important, the failure to lean on your banker as your adviser. The banker should be your adviser, not your enemy.
8. Failure to recruit and rely on a good outside board of directors/advisors. They are invaluable.
9. Being stubborn, over-estimating your own business intelligence, failing to change.
10. Spending too much time working in the business, instead of time working on the business.
11. And the last, and most important mistake, is not building a good management team. I’ll give you an example of two business owners. One owner spends three months in a cabin and the beach, and has a team of people in place to run the company. The other owner takes his laptop into the bathroom with him, and never lets any decision be made by anyone else. Which business would you want to buy?
Edited Excerpts from Tom Siders’ comments at an Upsize MN panel discussion. To read more about these excerpts, click HERE.
The Summit Acquisitions Group — Business Brokers and M&A Advisors — specializes in the sale, appraisal, and financing of privately owned companies ranging in valuation from $750,000 to $25,000,000. Contact their offices in Atlanta, GA or Charlotte, NC for a free consultation.