“Canadian small business owners can avoid business failure and being an industry statistic by learning from others’ mistakes,” according to Sandy Lyons, a Trustee in Bankruptcy at the Medicine Hat Office of Bromwich & Smith, Inc.
At the 2011 Medicine Hat Leadership and Business Summit this week, Lyons presented the top five mistakes that lead to Canadian small business failure. “Industry statistics report that within five years of opening their doors more than 30 percent of Canadian small businesses fail. Being aware of common mistakes can mean the difference between having a thriving business and being a business failure statistic,” stated Lyons.
1. Keep Your Business Credit Separate from Your Personal Credit
Many Canadian small businesses use personal credit to finance their businesses. “By using your personal credit for business expenses you may in turn be lowering your personal credit score, reducing the credit available for your personal needs or run the risk of losing everything,” said Lyons.
2. Hire Only when Absolutely Necessary
“Make sure your revenue is ‘real’ before hiring additional reports,” stated Lyons. “Many businesses make the mistake of being too optimistic in regards to projected sales and future business, and take on a new hire before the business or its team are ready financially or have a real need for the help.” When businesses hire, they need to be realistic and practical, as well as hire people that have the right attitude and will help the team drive one’s business forward.
3. Extending Credit – Should You Be a Bank?
Remember, one’s business is just that - a business, not a bank. “When a business offers extended credit to a customer, they are no longer a product or service provider; they’ve turned themselves into a bank,” stated Lyons. “Most small businesses don’t need to offer credit. They simply need to keep their accounts receivable low. Most businesses fail because they can’t collect their receivables, putting too much pressure on a business’ cash flow.”
4. To Market, To Market
“Once you register your company, start marketing and never stop,” said Lyons. “With a good marketing strategy, a small business owner can take control over their revenue stream and not wait for the products or services to sell themselves.” A comprehensive marketing strategy will include a significant online roadmap. “Online marketing is the future and if a business doesn’t have an online presence today, they will be invisible to a substantial percentage of potential customers,” added Lyons.
5. Profit is Queen, Cash is King
“Many Canadian small businesses that are profitable on paper don’t have the cash flow to see them through tough times,” stated Lyons. Having a business line of credit provides working capital in times of cash flow shortfalls. “If a business feels that they may have a future cash flow problem, they need to take steps now to ensure that their business survives and thrives in the future,” added Lyons.
“Canadian small businesses face a host of issues as they try to build their future. Success is based on how well they prepare and handle the problems facing every business, and Canadian business can start on the road to success by learning from the mistakes of those businesses that have come before them,” concluded Lyons.
About Bromwich & Smith:
Bromwich & Smith Inc, specializes in resolving personal and corporate insolvency-related problems. The company specializes in assessing personal finances, corporate restructuring, credit mediation and negotiation, corporate and personal proposals and bankruptcy, receivership, viability assessments, and acting as executor in complex estates. For more information, visit http://www.solvingdebt.ca.
