Everyone has a different level of risk aversion, but on the whole, entrepreneurs are risk-takers. I mean, who else in their right mind would gamble everything they have on an idea and a prayer like those of us who have the entrepreneurial spirit?
No matter where you think you sit on the risk-hating, risk-loving spectrum, your mind is about to be blown. You may never have considered the following risky business practices. But if you’ve fallen into these chancy habits, you are gambling in a major way with your profits! Even natural-born risk-takers like business owners have to make sure they calculate their risks if they want to stay in business.
Before you shake your head and tell me you can’t take on one more thing, let me first empathize with you. Owning a business is HARD. It’s never-ending. The thought of having to update your business practices probably makes you groan out loud. I understand (and feel) your pain. Even accountants find themselves giving into bad habits that put their profits at risk. However, the reason you are in business is profits. And if you gamble with those, you’re going to lose!
Now that you understand why this is so important, let’s learn about the risky business practices you want to avoid to protect your profits.
9 Risky Business Practices You Must Avoid
1. Leaping Before you Look
Most entrepreneurs are thrilled by new business ideas. But not all business ideas are equal—some are much better than others. Jumping into something new—from launching a new line of products to purchasing a state-of-the-art piece of equipment always bears a risk.
So, stay excited, but do your research first. Get comfortable saying, “No, but,” or “I’m pretty sure this is feasible, but let’s get another opinion.” Ask how, why, what, and when. Make sure you’re clear on the logistics — how will this really work? When would we be delivering? What projected ROI can we forecast? How can we mitigate the risk?
Talk to a lawyer for potential legal concerns, work with an accountant to build an estimated profit/loss analysis, and seek advice from other business owners in your industry. The final choice will be yours, but don’t make an uneducated guess with the business you’ve worked so hard for. Simply put, leaping too soon can stunt your profit or shut your doors completely.
2. Ignoring Customer Satisfaction
At the end of the day, no matter what industry you’re in, the most important thing is your customers. Now, you’re probably thinking, “DUH!” and that’s fair. When you first started your business, it seemed obvious to put customers first. But after a while, it’s easy to get caught up in the big business decisions, so much so that you forget about your customers.
It doesn’t take a genius to tell you that this is one of the most risky business practices out there. Ignoring customer satisfaction:
- Derails you and your team from your mission.
- Makes you lose sight of the big, overarching objectives for your efforts.
- Causes your customer retention to plummet. Even if you’re acquiring customers at a steady rate, you’ll lose them before you know it.
- Breaks trust between you and the target audience you serve.
And all of this makes you lose money. Which means your team loses money. And then you lose your team. Rinse and repeat. You get the point. You must keep your eye firmly on customer satisfaction if you are going to succeed in business.
3. Not Designing a Business Strategy
Talk about a gamble! Guys, you’ve got to have a strategy for your business, one that evolves with your business. It doesn’t matter if you’re a dreamer or a planner — you need to have an approach that drives the actions and decisions of your company. This strategy will trickle down and develop a mission, a brand, and a team.
Here are a few ways to hone in on your business strategy:
- Ask yourself what you’re trying to accomplish.
- Pinpoint a problem or pain point and articulate your solution for that problem.
- Decide who will find your product or service most helpful.
- Ask your team! They’ll have great insights into what makes your business move and shake.
4. Calling the Shots All on Your Own
You’re a business owner, so you probably like to call the shots… right? I don’t blame you — that has my name written all over it. But I do acknowledge that no business runs smoothly with a lone wolf in charge. While you are ultimately the one who has to make the final decision, it’s dangerous to assume that your opinions are the only ones you should listen to.
I’ve had brilliant clients who end up losing it all because they thought they should be able to make all the big decisions on their own. They took huge risks and lost because there was no one to keep them in check. Luckily, there’s a quick fix.
Schedule an hour on your calendar every week to meet with trusted colleagues or your team to bounce around ideas and solutions to problems. You may need to check your ego at the door, but in the end, you’ll be grateful you got second (or third or fourth) thoughts. As a bonus, this lets your team know their opinions matter, and that you count on them to grow the business. Letting your team know they are important to you increases loyalty, which means less turnover. #Win!
5. Not Expecting the Unexpected
The unexpected isn’t necessarily a bad thing. But it can feel that way when you always expect everything to go to plan. The truth is, you never really know how things will go when you own a business. Something crazy, like a global pandemic, could happen. We know that all too well now.
Now, I’m not saying that you should draft up all the ways your business could go wrong and sit in a corner worrying about them while sucking your thumb! I’m merely saying that you’ve got to be realistic. When you can be open to the unexpected as a new possibility, you’ll be able to zig when everyone else is zagging. Your business will be more competitive, and you’ll be just plain happier. When things are going peachy, take that time to plan ahead — thinking about how you could improve processes, work together better as a team, and expand your offering to your customers.
6. Poor Time Management
Ask any engineer, and they’ll tell you that there’s a way to calculate how much money you hemorrhage due to wasted time. Early on in my career, I wasn’t thinking about time management. I was focused on making it through the days and bringing home a paycheck, so I wasn’t sharing cans of tuna with my cat every night for dinner. Bet that rings a bell, right?
But now that I’ve taken a few trips around the sun as a professional, I see just how important it is to manage time well. It may not come easy, and you may need help, but with patience and effort, you’ll be able to nail down a time management process that works well for you. Time is your most valuable commodity as an entrepreneur. Try time blocking, download an app, or give the Pomodoro Technique a go and watch your profits increase.
If you’re still wearing all the hats, doing it all because you don’t think anyone else will do it right, get over that sh*t! Delegating is just smart business. Hand over projects and aspects of your business that you hate or that aren’t in your zone of genius! You’ll end up making up the amount you pay those pros in the time you save. Think of all the additional hours you could be using to bring in more business rather than messing around with the backend of your website!
7. Discounting Data Security
Data security isn’t always something we think about when it comes to risky business practices, but it can break a company like nothing else. Your clients and customers trust you with their personal information, and a security breach will cause them to find other solutions because they feel you’ve broken their trust.
Make sure you have essential protection in place—things like data encryption, anti-virus software, firewalls, and whitelisting. Provide your employees with company laptops or computers to keep information from being breached. Change your passwords frequently and never use the same password on multiple platforms. You can install a required password update so that all employees remember to do the same. Put procedures in place in case the worst occurs. Hackers keep getting smarter, so make sure to keep up with new technological safety precautions for your industry.
8. Not Knowing Your Numbers
Alright, everyone. I’m taking this one personally because this is my JAM! You must know your numbers if you want to win at the game of business! When you don’t know what’s coming in or going out, you can’t make wise business decisions. Period.
I recommend to my clients that they allocate some time (see what I did there?) to nail down and keep track of their business finances. My suggestion is to set aside one day a week—at the least, once a month—as their CEO day. During that day, they should rectify accounts, invoice clients, track their revenue and profit numbers, and clean up any bookkeeping left undone.
This is important stuff, people! Because this is how you discover where you could cut costs, what clients always pay late and may not be worth the hassle, and that you really can afford to hire a virtual assistant or Facebook ad manager. (Hurray!) When you don’t know your financial numbers, you’re flying blind, and are probably making poor decisions based on what you guess is going on in your business.
9. Falling Behind on Bookkeeping
I know that bookkeeping isn’t a fan favorite, so I’m offering up a piece of advice. Don’t do it yourself. Time and time again, I see clients in dire straits because they promised themselves this year would be different. They’d keep on top of their bookkeeping so that tax season would be a breeze.
The truth is biz ownership can feel like a big cluster. The last thing you want to spend your precious free time doing is sifting through receipts. If there’s one thing I know about business, it’s if you hate doing it, it will never get done. Rather than stress, send it over to someone you trust (ahem) and let them work their magic! And yes, we even accept shoeboxes full of receipts. ? Getting your accounts in order so you know where your business stands is the easiest risky business practice to give up!