Don’t make these three common small-business mistakesAccording to the U.S. Small Business Administration (SBA), a small business is one that employs fewer than 500 employees, a definition that applies to a wide swath of companies.
According to the U.S. Small Business Administration (SBA), a small business is one that employs fewer than 500 employees, a definition that applies to a wide swath of companies. In fact, the SBA says that small businesses account for 99.7 percent of employer firms, making them a significant sector of the economy. There are many challenges for small businesses, however. If you are a small-business owner or have plans to become one, the Minnesota Society of CPAs (MNCPA) offers these tips on three common mistakes to avoid.
Mistake No. 1: Act first, plan later
Forging ahead without knowing where you’re going is always a bad idea, but it’s especially true with a small business. Whether you’re launching a start-up or thinking about the near-term prospects of an existing company, it’s wise to set down a formal business plan or strategy for the near term. Such plans are essential for new ventures seeking outside financing, and can also provide a crucial reality check that will help clarify your goals and decisions, no matter how long your company has been around
It may also be a good idea for a mature company to create a new business plan if you are:
• needing additional funding or investments
• experiencing a meaningful rise or decline in demand
• facing new competition
• considering a change in management
• contemplating merger or acquisition
The plan should include financial statements that give you a sense of where you stand, along with insights into the company’s fiscal strengths and weaknesses. An overview of the market for your products or services and an assessment of the competition you face are also important elements of a strong business plan.
The plan should also describe your business, your top executives and other key employees, in addition to their work experience. Elements of the plan may vary depending on:
• strategic decisions to be made
• investments or financial backing to be secured
• new employees to be recruited
The SBA offers details on business planning that can introduce you to the process. For help crafting a customized plan and understanding how to implement it, turn to your CPA.
Mistake No. 2: Fail to set goals
Your business plan offers a blueprint for your organization, all that it has going for it and the challenges it may face. Many people drop it in a drawer once it’s done, but that’s a tremendous waste of valuable information and insights. Instead of setting your plan aside, use it to set near- and long-term goals and to diagnose any roadblocks that may stand in the way of future success. Your business plan can be the centerpiece of a strategic planning session in which your company executives, and perhaps your investors, plot a course for your future. Remember that including your CPA in this planning session can provide you with valuable financial and market insights. If your company is a solo or very small operation, consider sharing your plan with trusted advisors, including your CPA, to gather valuable input.
Mistake No. 3: Forget your purpose
When you launched your company, you probably had very clear goals in mind. Are you still on target to meet them? Sometimes, given the day-to-day demands of running a business, it’s possible to forget the reason you started the company in the first place. Or perhaps a challenge in one area of the business has made you lose sight of opportunities or threats in another. If you’re not sure that your company is still on the right path, an objective observer, like your certified public accountant (CPA), can offer some worthwhile perspective.
Your local certified public accountant (CPA) can help
CPAs work hand-in-hand with hundreds of thousands of small companies across America, offering them advice and information that empowers them to meet and achieve goals. Be sure to consult your CPA with all your financial questions. Don’t have a CPA? Visit www.mncpa.org/referral to locate one in your area.
The Minnesota Society of Certified Public Accountants (MNCPA) serves the public interest by advancing the highest standards of ethics and practice within the CPA profession. MNCPA delivers on that promise by offering extensive continuing professional education and resources; advocating for members and the public with regulatory agencies and boards; and mentoring and encouraging the CPAs and business leaders of tomorrow. Founded in 1904, MNCPA’s 9,500 members work in public accounting, business and industry, government and education.