10 Common Business Mistakes

Making mistakes in business is expensive. Ten common mistakes people make when starting a new restaurant or cafe are:

1. Over capitalisation

Over spending to establish your business puts unwanted pressure on the business to perform from the very beginning. Make sure you budget for every possible cost and allow sufficient money for operational expenses. There are always unplanned expenses in a startup so try not to panic, instead look for the most effective way to counteract the problem.

2. Under capitalisation

One of the most common mistakes people make in a new business adventure is to under estimate the amount of capital required to start their business. Very few businesses are self supporting from the word go. You have to plan to build up to success.

3. No business plan

If you fail to plan, you plan to fail. It is a simple as that!

4. No operation plan

Once your business is up and running you should develop operational plans for its continued success, if you don’t already have one. These plans should cover expansion, staff training, how to maximise your efficiency and in fact anything that you think may help your business grow. As your business increases your plans should change to reflect that growth.

5. Keeping records

With such a vast range of computerised programs available for business, failure to keep accurate records is inexcusable. No longer can we use the excuse that I don’t know how to use a computer. These programs are designed to be simple to use and mostly they are, or they would not still be in business.

6. Overdrafts

In business it is common to “use other people’s money”. What you should realise is they are not talking about your business. They are referring to the shares offered by public companies to investors. If your business is making 30 percent profit on Gross Sales and it is costing you 10 percent for your overdraft facility, does that mean you are only really making 20 percent profit? Actually it may even be worse than that. As your overdraft is calculated on the total of your expenses and not just on the gross profit, it may be an even higher cost. An overdraft means that you are spending this week the money you plan to earn next week!

7. Second hand equipment

Often sold as “preloved”. Sometimes it can be an incredible bargain, especially when purchased for the right price at auction. Before you purchase any equipment make sure you have done your homework. Know exactly what the new price for the equipment is. Understand that the new price is not the retail price, but the discounted rate that an authorised dealer is prepared to sell it for. Many people have been caught out buying used catering equipment, only to later realise that they paid almost new price without any of the benefits, such as the NEW warranty period. Also stainless steel equipment is timeless. It may look 2 or 3 years old but the reality is it could well be 10 or more. The bottom line is: if it is that good why was it sold in the first place? The answer to that question may save you a fortune!

8. Failure to learn from mistakes

It is important to constantly analyse your business performance and the performance of all the people involved in it, including yourself. If something is not working, or it is not being done as well as it could be - Change it. You can learn a lot from the experience of others. Sometimes the best investment you can have in your own business is to work for someone else in a similar business. Remember if it works - keep doing it, but also keep trying to improve it. If it doesn’t work - stop doing it!

9. Relying on the skills of others

Relying on the skills of others may be enough to get your business started and even successful. However it is not enough to keep it successful. Never stop seeking to improve yourself, both as a manager and as a business owner. Everyday is a school day! We only stop learning when we are dead.

10. Failure to explain key issues to staff

As a business owner it is natural that you will have expectations for success. Make sure that your staff understand and support these.

Okay, who is to blame?

Ultimately, if something goes wrong with your business, it is your responsibility. Blaming other things may sound good in conversation, but it never justifies the loss of the business. Losing your business may also mean losing the collateral you placed as security for the business.