Are you making needless, completely avoidable mistakes that are costing your business significant amounts of money? Don’t feel overly guilty if you answered in the affirmative. Many entrepreneurs, startup owners, and founders of all kinds of businesses often fall prey to several common errors that result in fines, wasted cash, and lost productivity.
In a fast-paced commercial environment where time really is money, it’s wise to check your organization’s practices and policies to see if any of the following errors is on the radar. If that’s the case, act fast to make changes and stop the bleeding. In nearly every case, remedies are quick and easy, so there’s no need to lose sleep if you discover that several of the following apply to your company.
1. Using Poor HR Screening
If you don’t have an in-house human resources expert, beware of hiring people for various positions based on gut feeling. The intuition technique is notoriously unreliable and can get you into financial trouble in short order. Instead, spend time screening new hires to make sure they are a good fit for your corporate culture. Consider using 90-day trial periods, outsourcing the entire HR function, or using temp workers to cover daily work until you’ve had time to do in-depth interviews of permanent hire candidates.
2. Committing Hours-of-Service Violations
In the transport industry, hours-of-service violations are a tripping point for managers who don’t stay on top of their fleet drivers’ accumulated driving time. Fortunately, if you’re susceptible to this problem, a fleet management program like those described at Samsara.com can eliminate the dilemma overnight. That’s because any transportation manager can use a HOS (hours-of-service) compliance solution to forever avoid the costly mistake of allowing drivers to spend too much successive time behind the wheel. For larger organizations that employ hundreds of truck drivers, the lack of a HOS solution within a larger fleet management system can mean huge fines that are 100 percent avoidable.
3. Underpaying Taxes
Fortunately, there’s a simple solution to the underpaid tax fines and penalties that add us so quickly. Hire a professional to prepare all your tax and legally required financial filings.
Look for CPAs who specialize in business taxation, not personsal tax work. Ask for references and beware of sole proprietors who have little or no experience. If you do receive a bill for underpayment, make it right as quickly as you can. That way, you avoid the accumulation of interest on the initial penalty. Speak with your CPA and learn how to always file on time and pay the correct amount of tax.
4. Signing Long Leases
Owners of new businesses often get roped into longish least terms by salespeople who know better but don’t have the scruples, to be honest. It’s just a sad fact of life that far too many, often young, entrepreneurs are offered free rent amounting to perhaps three months’ worth of lease payments, in exchange for signing five-year or longer contracts.
Then, when profits are not as ample as expected, or if the company fails, you can be left with a massive financial obligation. So, even if it costs a bit more, consider signing six-month or one-year leases until your profit-making enterprise is well established.
5. Hiring Too Many People
When times are good and orders are coming in at a fast and furious pace, it’s tempting to hire extra help. This is a natural way that entities grow with success as the year’s pass. Unfortunately, management teams tend to over-hire much more often than under-hire.
This phenomenon can come with a high price tag even if the excess personnel is terminated within the year. That’s primarily because training and bringing new people on board is an exceedingly costly venture. What’s the answer? For many businesses, management imposes a 60-day cooling-off period before making a final decision on hiring.
It’s a simple technique that allows enough time to see whether an extra person is necessary or might just be a luxury.
6. Assuming No One Will Sue You
The lack of proper insurance coverage has sunk many entrepreneurial ships. Too often, cash-starved startups decide to skimp on policies that offer excellent protection against legal problems of all kinds. It’s a common mistake to assume that because you work alone operate out of a small office with just a few staff members that no one will ever bring a lawsuit against the company. Unfortunately, the world is an unfair place and even the most ethical, careful, kind, and knowledgeable owners receive documents informing them of pending legal action against them. Before opening the doors, consult with a lawyer who specializes in business insurance and commercial legal matters. The modest cost of the initial consultation is well worth it.
7. Not Keeping Detailed Records
Whether for tax purposes, industry requirements, best practices, or simple record-keeping purposes, the failure to document your actions as a business owner can lead to expensive recovery operations. And, in the digital age when it’s almost an effortless task to maintain detailed daily logs of emails, payments, transactions, decisions, and events of all kinds, there’s no excuse for falling down on this key chore. There are signs your business needs better accounting software, for example, that can also point to the need to keep better records. If you are having problems with routine record keeping, hire a professional administrative assistant to get things in order.
8. Offering Ownership Shares to Early Investors
When you’re first getting a startup off the ground and are in dire need of capital, it’s just too easy to bite on offers like, “I’ll invest $100,000 if you give me 10 percent of the action.” It’s a tempting offer, especially for an entrepreneur who realizes that much cash could get the entire operation up and running. Many people accept such offers and live to regret it. Why? Because unless you write a legal limit into the contract, that investor automatically becomes a major stockholder. Consider consulting a lawyer when you get an alluring monetary offer and the person wants a percent of the ownership stake. One common workaround is to offer a fixed percentage of future profits for two, five, or seven years, but not in perpetuity.