Top 5 Bad Habits of Business Owners
Many people take pride in being an entrepreneur and they’ll happily talk about how successful their business is. Here’s the thing… most of them aren’t really being honest (gasp…). We’ve seen companies who make over a million dollars go broke.
Why does this happen? How is that even possible? Many businesses, regardless of how big or small, are practicing bad habits that they are unaware of. But don’t worry! We’re here to help. We’ve compiled a list of 5 common, yet tragic, practices that may just run your company to the ground.
1. Paying Too Much For Office Space – Rent is a necessary expense, yes, but is the amount you’re spending for a space really worth it? If you want to get an idea of what you’re paying, take your rent and divide it by the number of employees you have. That’s the amount you spend for each employee to simply sit at a desk and work for you. Hopefully, that will give you a different perspective on what you’re spending and whether your income can easily cover it.
There’s no specific dollar amount you should have because it really depends on your industry, revenue, etc. But look at that number again. Is it worth it? If so, great! If not, maybe consider other locations or (if you have enough space) rent out empty offices each month to offset the cost.
2. Not Knowing Your Numbers – What is your total monthly revenue? How much do you spend each month in expenses? What was the total amount of payroll last pay period? Chances are you don’t know this info off the top of your head, and that’s an issue.
If you don’t know your numbers, you’re putting yourself in a dangerous place. You should know your numbers inside out, upside down, and sideways at any point in time. What is your data trying to tell you? Is it crying for mercy or screaming victory? Just listen… those numbers are talking.
3. Time Tracking – Do you track you and your employees time? No, I’m not just talking about clocking in and out. I mean, do you know the amount of time that’s being spent on different tasks and projects? Time tracking isn’t a means of being a micromanager - it allows you to see if you’re pricing your services accordingly, and if employees are productive. A great tool we love to use is Harvest Time Tracking. It’s simple and efficient, and will allow you to understand your data in no time.
4. Co-Mingling – We’re not talking about happy hour. Co-mingling is using your business account for personal expenses. (Yeah, we know about those Starbucks trips you love to make.) Your numbers will never be accurate if you’re not separating your expenses. Use your business account for business and your personal account for personal matters. It’s that simple.
5. Not Paying Yourself – You’d be surprised how many business owners don’t pay themselves enough, or at all. Most just take money from their business account at the end of the month. This is a big no no because, again, your numbers will never be truly accurate (and you could get in trouble with Uncle Sam). Determine your Market-Based Wage and then put yourself on payroll like everyone else. If you get a chance, read the book Simple Numbers, Straight Talk, Big Profits! by Greg Crabtree. He covers a lot of important topics in regards to running a business like Owner’s Salary, Forecasting, Labor Productivity and more. Do yourself a favor and get a copy of this book - you’ll understand why once you read it.
So that sums up our class for today… I mean blog post. If you’re doing any of the five things listed above, you can hopefully start to implement small changes that will dramatically change your business. Make sure to check out our blog called “Top 5 Expenses That Are Killing Your Wallet” to learn more about personal spending and expense tracking. Remember, small changes can lead to big results.