5 Ways You Can Lose Your Business and How to Avoid It

I had the opportunity to be in a mastermind last weekend, and we were talking about various different issues in regards to business. The topic of ways you can lose your business came up. There are factors that you really need to pay attention to, that will really make all the difference in your business. 

A lot of times when people come to me, they’re usually in crisis mode, there’s something going on in their business, that’s just a mess. It comes from a lot of different places, but there are five main categories, things that really can put their business in crisis mode. 

This is the conversations that I have with my clients, potential clients that I think are really important. 

5 Ways You Can Lose Your Business and How to Avoid It

Be proactive to avoid these five things that can cost you your business. These are the things that no matter how much money you’re making, no matter how many sales that you have, you can see your business go under because you don’t have these protective

1. Not protecting your intellectual property (IP). 

You did not trademark your products, services, and your names for your products and your services. It’s likely you didn’t copyright your content. This is really important! I put it as number one, because there used to be a time where I didn’t really think that this was as big a deal as it is. But it is absolutely essential because of the internet, because of the way business is done now. 

Everything’s done remotely, people are in different places, you have to be online in order to really connect with your clients in a way that you didn’t have to. 

Your intellectual property is becoming a bigger, bigger deal and something that you really have to protect. Now there are so many camps that try to protect everything, whether they want it or not, because they don’t want people to use it, or they want to own it. For lack of a better term, trademark trolls and copyright trolls. That’s not really what I’m talking about. What I’m really talking about is about you have a branded service, a branded business name, something that’s very important that you really need to ensure that it has your branding. 

As you’re making yourself known, or this product or service known it is something that needs protecting. It’s really important to make sure that you have this in place. 

You need to look at whether or not your business name needs to be trademark. Maybe it’s not your business name, but you have products, or you have specific services that need to be trademarked because it has name recognition. 

Sometimes some of you have a collection of content out there, whether it be training videos that you’ve made, lives that you’ve done, blog content, those types of things. They may need to be registered as copyrights. 

This is especially important whether or not you choose to go into licensing and things of that nature. That makes a big difference. So we want to make sure that we have our IP and failing to do so can cause a lot of problems in your business. It might even cause you to have to rebrand if you don’t look at that soon enough. 

2. Failing to have contracts for your independent contractors. 

So this is really important. A lot of times, especially with independent contractors, business owners rely on verbal or written agreements that are not cohesive. It doesn’t make sense for your business.

There’s two ways to really look at:

• The independent contractor, should have their service agreement that you can sign and be able to rely on as clear guidelines of deliverables, service terms, etc. But sometimes people have to hire independent contractors, as a regular part of their business. 

• The business itself needs to have its own independent contractor agreement, where it gives to the people that are doing certain services. You have to look at both sides of that. 

How to Protect Your Business when Working with Independent Contractors

Either way, you need to make sure that there is a written agreement that spells out the terms because independent contractors are not employees. They are just what they sound like, they are vendors. They’re people that provide services, and you need to have agreements in place to deal with that. 

So make sure that you have good independent contractor agreements in place, and that there are parameters in which you expect the work to be done and how that work to be done.

3. Fail to protect your cash flow by having timed to payments with vendors, or you have too much inventory, or you don’t have your customers paying in a timely manner.

For small businesses, managing cash flow can be very difficult. Maybe all of your bills are due at the first but all of your clients pay around the 15th. And so there’s a certain period of time where you are almost negative, if not actually negative, even before you actually start collecting payments.

You’re always kind of in this mode, where you don’t have enough money, or there’s a period of time where you kind of have cash grabs. That happens a lot with small businesses, no one’s alone in this, but it’s really important to really manage this. 

How to Create a Better Cash Flow?

There’s a couple ways to create a better cash flow for your small business. 

• Number one, I always suggest to my clients that they have a good CPA and accountant/bookkeeper, having that all together really makes a difference.
• Number two, working on your agreements with your vendors and your clients. Obviously, you want to have good agreements, contracts, and things like that with your clients in regards to payment schedules. (Including: How they pay and timeliness of payments.) This creates security knowing that you have the revenue to pay your bills. And then of course, work with your vendors and the timing of when payments are due. 

So there are certain times and when you have to buy and you have a 30 day net, you have to pay right then and there, all those different things make a difference. 

A question to ask yourself as a small business owner? Do you need to have a loan in place or a line of credit to help you with the ebbs and flow of your cash flow? 

Those things that need to be looked at. So that’s a combination of things, in terms of understanding accounting, and understanding the legal obligations you have with payments and receiving payments to ensure that you have steady cash flow.

4. Not having the right business structure and tax status.

These are very frequently asked questions when businesses are first starting out or growing. 

Are you an LLC or a corporation? 

Are you taxed as a C Corp, S corp, or sole proprietorship?

And that’s not just the end all be all about when we’re talking about structure. Sometimes it has to do with the internal structure, for example – do you need subsidiaries? Do you need to break some things off? Do you have the right tax structure to have the proper benefits in place in order to get the right deductions?

How do we determine the right business structure and tax status?

Ultimately, what things are going on in the business to make sure that the business itself is structured correctly, and whether or not you have taken advantage of the tax deductions that you can to ensure the longevity and steadiness of the business. 

So these are things again, that working with a good CPA and attorney will really make a difference in ensuring that you have these things in place. The structure of your business should be sound, and it have a long life because you’ve done the things internally and externally to make sure that it does well.

5. Failure to hire and properly train employees. 

This is really important in terms of understanding what is needed in your business, in regards to human resources. Human resources is exactly what it sounds like, our resources of people that are helping you with your business. These humans can be independent contractors and/or employees. 

For independent contractors, you don’t have to have a whole succinct training program because they should be independent professionals that are providing a specific service that they specialize in. 

This is different with employees. You have to have more things in place to ensure that your company can deal with it. 

Must Haves When Hiring Employees

As you’re starting to hire employees, you should make sure that you have these things in place

• an employee manual
• rules and regulations that your employees need to know
• an internal policy
  • Hiring and termination process – Helps to address any discrimination claims, unemployment problems, and other issues that can occur when you’re managing people. Ultimately, you want to have strict processes in place in order to deal with that. 
• There might be other things that we talked about, going back into issues three and four regarding cash flow and business structure.
  • Are you offering health insurance
  • paid vacation time
  • Training opportunities

I get a lot of complaints from clients, where they’re saying, these people aren’t doing what they’re supposed to do. You know, we’re having a lot of high turnover, we’re having a lot of problems, these problems, these things, really a lot of times stem from poor training. 

And I hate to say that that’s on you, as a business owner. You really have to have some clear training, you can’t just throw people into the fire, and expect everybody to come out unscathed. That’s not good for you as a business person, that’s not good for the employee.

That’s what creates high turnover, because people like to come into a system where it’s kind of like a machine. Now, obviously, with small businesses, it’s not always like that. Everything isn’t always smooth. But, if you create a process in which people can come in, you create a clear training process, you create clear expectations, that makes that process that onboarding process a lot easier. And it allows people to be able to work more efficiently. And it also prevents a lot of turnover, and a lot of problems and a lot of complaints because you have a clear training system in place. 

So these are things that I think that are most important in terms of your business and being clear about what you’re doing. These are really important factors in terms of understanding what it is that you need to keep your business going. 

A lot of times with small business owners, you’re only focused on marketing, which I’m not saying that marketing is not important. It’s definitely an integral element that converts into necessary sales. But if you don’t have the systems in place to ensure the longevity of your business, it doesn’t matter how many sales you have, your company can implode without proactive planning. 

Author Bio: 

I am Shahara, right. I am a business law attorney. I work with small businesses and nonprofits as General Counsel, outside General Counsel, doing things from day to day legal advice, contract preparation, and review, and corporations, formations, trademarks, all those different types of things. 

I work for my clients to really make sure that they have a holistic legal department, I’m at a unique price point.