5 mistakes new firm owners make when starting their business

Very few of us set out to change the world or build an empire. Most are accidental entrepreneurs who start a business because they just want to pay the bills, control their own schedule, or work on their craft and be their own boss. As a result, many are rather unintentional when it comes to structuring their business.

This is a sure-fire way to lose control. If you’re not intentional about how you run your business, your business will run you, and all those dreams of increased freedom and flexibility will come to naught. So let’s look at five common mistakes new firm owners make, and how they can be avoided or corrected.

MISTAKE #1: Taking on any—and every interested client

Most owners aren’t that selective about which clients they take on. Sure, in the beginning, you have to pay the bills. I get it. I was there. I had zero standards when I first started. The problem with this is that you end up with a lot of PITA clients. You know the ones. As the acronym implies, they’re a real “pain in the ***” because they suck up all your time and energy. It’s not because they’re bad people; they’re just a bad fit for you.

SOLUTION: Understand who your ideal client is

Even in the beginning when I was willing to take on less desirous clients, I had a sense of who my ideal fractional CFO clients were—or would be. This is important, because if you don’t know, you can’t actively look for, or recognize, them when they appear. Consider your skills, working style, the services you’re offering, the timelines you can deliver, and what you feel your services are worth. Based on these facts, who are your clients? To find the right fit, look for clients whose needs, expectations and resources align with yours.

MISTAKE #2: Hiring the wrong people

Your team is integral to your success, particularly early on as you transfer more and more responsibility from yourself to others. When hiring, most entrepreneurs focus on shiny resumes brimming with impressive skills and qualifications. Now don’t get me wrong; talent is important. After all, they have to be able to do the job you’re hiring them for, but the real question is do they share your vision? Your values? It may sound unnecessary, but here’s the reality: If you don’t define what core values your company is going to follow, then your employees will do their own thing.

SOLUTION: Know your company culture and hire for fit

You probably won’t like the culture your employees define for you, so the solution is to define it yourself. Consider your ideal clients, the services you provide to them, and ask yourself what you are pitching. What does your firm stand for? What are your values? How do those make you a desirable business partner? Then take it a step further. What sort of company culture needs to exist in order to sustain a commitment to those values? What sort of people fit in with that culture? Hire them.

MISTAKE #3: Using too many different types of equipment and software

Contrary to popular belief, multitasking is not as productive as monotasking. Similarly, using numerous types of equipment and software to do the same task or parts of the same task isn’t as efficient or productive as using one solution. You simply can’t be an expert in everything. Consider Southwest Airlines. They’re arguably one of the most successful airlines, flying Boeing 737s exclusively because the maintenance engineers only need to know how to fix one type of plane and become experts at it. Shorter maintenance times mean planes spend more time in the air than in the hangar, which means more profit.

SOLUTION: Choose one type of equipment or software, and stick to it.

At Tee Up Advisors, we work with one accounting software: QuickBooks. We train all of our staff and clients on it, and do not hire staff or work with those who are unwilling to use it. We’ve made an intentional choice about the tools we use. Ask yourself what tool is best for what you do. Decide what it is and stick to that decision. Don’t let your clients or staff complicate things by bringing in other technologies. You don’t have time for that. Specialize. Go an inch wide and a mile deep, and you’ll get far more accomplished.

MISTAKE #4: Failing to set financial targets (KPIs)

When starting out, most firm owners have a simple financial goal: Cover costs and earn a reasonable income. Makes sense. It’s a reasonable goal. The problem is that many owners aren’t specific enough about what exactly this means. Your revenue is not simply “however much you manage to sell.” Your income is not “however much is left over after expenses.” The more loose and ambiguous the target, the less likely you are to achieve it. And if your revenue target is synonymous with your gross income or operating profit, you’re going to be disappointed at the end of the year.

SOLUTION: Set specific revenue targets, profit goals, and cash flow management

“Begin with the end in mind.” –Dr. Stephen R. Covey 

What are your anticipated annual expenses? Interest? Taxes? How much profit do you want to make? Add it all up, give yourself a buffer, and that’s the target revenue you need to work toward.

To succeed, you also have to be intentional about managing your cash levels. Be proactive, not reactionary—it’s always better to ask for credit when you’re in a position of strength. Negotiate interest and payment terms with your bank and suppliers in advance, and ensure you have a line of credit when things get tight.

MISTAKE #5: Using too many marketing channels

There are so many ways to do marketing these days with TikTok, Google, LinkedIn, YouTube, blogs, and SEO … the list goes on. Many entrepreneurs feel overwhelmed by the sheer number of marketing channels available, and fear missing out if they’re not engaging audiences on all or most of them. This usually results in shallow, broad, and sometimes disorganized strokes of marketing that have little impact on driving sales. In addition, consider why you’re paying for Google ads. Is it because these ads work or because everyone else is doing it?

SOLUTION: Establish a precise, targeted marketing strategy

Just because there are many possible marketing channels doesn’t mean you can or you should be using all of them. Think about the product and/or services you provide, and your ideal client. Where are they? What channels are they using? Think about the software and technology choices you’ve made. Are there marketing channels that tie into these? Once you’ve established which channels to focus on, make sure you understand what the sales funnel is and how to measure the impact of your marketing on your revenue. If you’re not intentional about how you spend your marketing dollars, yoru efforts will disappear.

Building your firm

While mistakes are inevitable and most won’t be detrimental, they are distracting and expensive. By being intentional about your choices—whether selecting the right clients, hiring for cultural fit, standardizing your tools, setting clear financial targets, or focusing your marketing efforts—you can build a thriving firm.

Remember, your business should work for you, not the other way around. By avoiding these common pitfalls, you can gain control, achieve your goals, and create a firm that’s built to last.