Top Small Business Management Mistakes to Avoid

by Elizabeth Fels Last Updated: Mar 6, 2019
Are you making management mistakes that could damage your business? Whether it's unhappy employees, lack of customers, or poor cash flow, there are many things that can threaten your business' success. Here are the top critical small business management errors you should watch out for.

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Small business management is challenging and complex, and far too many companies squander valuable opportunities because they continue to repeat the same preventable mistakes. SBA statistics on business failures reveal that only half of all startups survive more than five years. However, many of these failures are preventable.

While everyone makes poor managerial decisions at one time or another, here are some of the most common mistakes that can seriously derail the efforts of a small business.

Ignoring Sales and Marketing

Startups and small businesses tend to run in boom-or-bust cycles. When they are busy, sales and marketing efforts are neglected in favor of production tasks. Even salespeople pitch in to help, and the difficult work of developing new products and reaching customers is neglected. When the good times fade, the company finds itself struggling for orders without any additional revenue lines waiting to take up the slack. As a small business owner, you need to ensure that your relationship-building efforts remain robust no matter what the prevailing business climate may be. Customers expect to be frequently updated and educated on new products and industry developments. If you are unavailable, a competitor will be more than happy to fill the void.

Micromanaging Employees

A common characteristic shared by many owners and managers in small companies is the urge to micromanage their employees. This comes from a deep sense of connection with the business and a belief that no one else cares enough to complete the task at hand in exactly the right way. In addition to inhibiting the potential of the employee, the manager ends up with such a heavy workload that it's impossible to be completely effective at any one specific task. The effects of micromanagement negatively affect productivity, aptitude, engagement and progress. Fight the urge to intervene, and allow your employees to reach their fullest potential.

Failing to Understand the Financials

Most small companies expect to grow, and owners and sales managers want to take advantage of every new sales opportunity that presents itself. But capitalizing on those opportunities and growing the business often requires money. If the business doesn't have sufficient cash flow or retained earnings, the funding needs to come from borrowing or an investment of funds from either the owner or an outside investor.  While owners may be well versed in the operational aspects of a particular industry or trade, many lack a basic understanding of a profit and loss statement, balance sheet and cash flow analysis. Expenditure-related decisions that are made without a clear understanding of the financial consequences can be devastating. While closely monitoring sales and profits is important, understanding cash flow trends should always be your primary focus.
If expansion seems justified after careful consideration, it is critical to thoroughly research and review the proposal to establish feasibility. If the project receives a green light, make sure the right people are in place to carry out the initiative in a timely, cost-effective, and profitable manner.

Lack of Accountability

Accountability is a difficult concept for many small business owners to understand and properly practice, especially for those without previous managerial experience. Disagreements and hard feelings arise when expectations are not met and support has been inadequate. Before addressing a performance issue, it is important to ensure that the team member has all the tools and training required to successfully complete the tasks included in their job description. It is your responsibility to set obtainable and defined goals. When the standard is clearly established, employees who consistently fail to comply must be asked to leave.