Business

The 7 Most Common Mistakes Made by New Business Owners

 

Having been involved in the startup of several new health care businesses over the past 25 years, I’ve made 1000’s of mistakes and made decisions which I would make differently if I could go back and do them over.  Many years ago, however, a good friend and mentor told me that the worst thing a business owner can do is to NOT make a decision.  Even if you make a wrong decision, in most cases you can correct your mistake once you realize the error of your ways.

Our most recent endeavor, Oahu Spine and Rehab in Kailua, Hawaii, is an integrated, physical medicine center with medical doctors, chiropractors, physical therapists, massage therapists and acupuncturists all working together for our patients.  We went through a long period of time before evening opening our clinic of preparing and researching to avoid making as many mistakes as possible.  And, even though we have been very successful to this point, we have made some less than optimum decisions.  Also, we are only 16 months into this endeavor and, as with any new business, still have some things to learn and the potential to make mistakes.  We are in the business of health care and although it’s important for us to be most concerned about quality of care and taking care of our patients, we must also be concerned about maintaining a healthy financial bottom line so we are here to help people for the long run.

Simply opening a new business is to have beaten the odds and nowhere is this truer than in Hawaii.  Commercial property vacancy is one of the lowest in the nation which leads to high rents and build out costs.  Labor costs, benefits and taxes are also some of the highest in the country.  Therefore, it is even more important for us to avoid as many mistakes as possible.  Challenges are part of being in business and it’s important not to trip on long term planning or missing factors that could bring greater success to the business.

Having said all of this, here are some of the more common mistakes that I’ve seen over the years in our businesses and those that I’ve been close to, that are not easily identified for most entrepreneurs and are somewhat counter intuitive to most people. 

 

1. Thinking that working harder will bring more success.  The most important commodity in a business is strong leadership and vision, and the ability to communicate it to your team and customers.  Actually spending time away from your business can help you creatively formulate strategies for growth.  Strive for balance in all areas of your life. Also, your team of employees will learn to take responsibility, make better decisions and solve problems when you aren’t always there to do it for them.

 

2. Failing to invest in people. Too many business try to hire the cheapest labor possible instead of the best available to do the job required.  Investing in the best people, as well as in technology and outside expertise, will allow a business to streamline procedures, eliminate duplicate process and continue to grow.

 

3. Doing too many things themselves. As a business owner there are things you do better than anyone else you know.  Therefore, you continue to do them yourself and procrastinate the hiring of others and delegating those tasks.  Obviously, you are stunting the growth of the business and should hire quality people to take over those tasks.

 

4. Focusing on the topline, not the bottom line. I’m not sure of any other type of business where this is more prevalent than in health care.  It seems doctors have a need to brag to each other about how big their clinic is, how many patients they see, how much money they collect, etc.  The truth is that a smaller clinic may actually be operating at a higher level of profitability and therefore is much more stable and likely to around for a long period of time.  Every dollar of profit is much more valuable than the revenue dollar at the top.  As a business, we are constantly asking ourselves—Can we streamline processes to save on labor costs?  Can we save on supplies or inventory?  Save on taxes?

 

5. Failing to focus on the right value equation. The two greatest forms of capital in any business, especially healthcare, are the mental capital (our service and expertise) and relationship capital (our staff, patients, community, family and friends).  Garrett Gunderson, entrepreneur and author, says:  “Mental Capital + Relationship Capital = Financial Capital.”  As doctors and healthcare practitioners, it’s imperative that we understand we are in the people business, not the numbers business!  When these factors are aligned, the organization will shine.  When they are out of balance, bad outcomes happen and the desire to work harder on a bad philosophy takes over and produces more bad results.

 

6. Diversifying prematurely. As the old saying goes, “do what you do, do it well and do more of it!”  As entrepreneurs, we have a tendency to have a high risk tolerance which can lead to investing profits of a business in areas that distract us from our purpose and take away resources from where they can do the most good.  Where should you invest your profits?  Invest in your business and in yourself.  There are few other investments that will produce the incredible return you will get long term from investing in yourself and from putting money back into your business to stimulate quality and growth.  Also, retaining a portion of your profit will give you the ability to seize opportunities when they appear.  I’ve found that when I’m working from a place of abundance I make better choices about who I work with and how I spend my time.  Scarcity leads to poor, “needy” decisions and “time terrorists.”

 

7. Listening to business or financial advisors who have a “cut back “mentality. I’ve had a lot of business advisors, coaches, accountants, attorneys and financial advisors over the years. Some great, some awful.  When starting a new business, many owners just take the advice of whoever is available or was recommended by a family member.  A better approach would be to interview these advisors or managers as you would a prospective employee.  Look out for the “dark-cloud, Chicken Little, or Negative Nelly” who says you should cut back but can’t tell exactly where and why.  As Zig Ziglar used to say, “don’t go to a fat doctor,” and don’t trust the financial advice of someone who’s broke.  Find successful people to mentor you.  Look for a “production” attitude, not a “reduction” attitude.

As business owners, we have a responsibility to our employees and customers (patients) to maintain a financially successful business where we can provide exceptional service in a fun, positive environment.  Having the right philosophies will help us avoid common mistakes that often lead businesses to struggle and even to fail.  If our goal for our business is to thrive and to grow, we must be committed to personally thrive and grow as the leaders of our organizations.  If we properly focus our attention on our business, we succeed.

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