QUESTION:  Of all the pitfalls in running a business, which do you consider the most common and how can I avoid making these mistakes?

 ANSWER:  As a small business owner, you can have a solid business plan, a great concept and a good reputation in the community. Yet a single mistake can be all it takes to upset your apple cart. Consider these common errors that can doom small companies:

1. Relying too much on one “big” customer – Never, ever have all your eggs in one basket.  In fact, one customer should never account for more than 10% of your business. While it is great to have a large account, it is also true that these same accounts may expect you to be on call 24/7 and cut your margins to the bone. As in any investment, it is wise to spread your risk. Five customers producing $10,000 each is preferable to one customer producing $50,000 in revenue.

2. Losing key employees to competitors – Most small businesses have only a few employees. If your shop consists of three “key” people and you lose one to your competition, you have lost one third of your workforce. You must now pick up the slack, while searching for and training a replacement. The former employee may also take some of your customers. Remember, good people are hard to find.  Shower them with praise when warranted. Involve them in the decision making process. Be aware of what your competition offers their employees and make sure that compensation is not an issue.

3. Trusting a bookkeeper too much – Remember, everyone is honest until circumstances in their lives dictate desperate measures. You should maintain control over your company’s money whenever possible. Do not give a bookkeeper check-signing authority. Review your monthly bank statements and   check the list of receivables and payables for unusual entries.  Be sure to include a fidelity bond as part of your insurance program.

4. Having a relationship with just one bank – Most small businesses depend on loans and lines of credit to get them started and avoid cash-flow shortfalls. If your bank has a change in policy or ownership, you may need a backup plan. If your business has ample cash flow, consider opening a second account with another banking institution who offers lines of credit

5. Thinking you will never get sick or unable to perform your duties – In a small business, you are the engine that drives the train. If you have a long term illness or become disabled it could mean the demise of your business.  Delegate important jobs to capable employees and mentor their progress in a constructive manner.

6. Working with unstable suppliers or distributors – If your operation depends on other for the goods and services you provide, it is critical that you take great care in the selection of those with whom you do business. Always ask for customer references and work with multiple suppliers whenever possible. Have your attorney review contracts to make sure you understand the terms and conditions.


Gray Poehler is a volunteer with the Naples Chapter of SCORE. To learn more about management issues facing your small business, contact SCORE Naples. Counseling is provided FREE of charge to all U.S. citizens and legal aliens.  To register call 239-430-0081 or visit our web site . A counselor will contact you within 48 hours.  Please include your name, email address,  and a contact phone number.