In all the years I have been involved with small business, it never ceases to amaze me how many problems facing owners have been self-inflicted, creating problems of their own doing. And indeed some of these problems have resulted in the failure of the enterprise. Below I have listed five of the most egregious problems that have caused much pain to the small business entrepreneur.

1.. POOR PLANNING

Failure to plan is tantamount to planning to fail. Think of every decision that you make in your business. What products should I manufacture? What products should I purchase for resale? Who is my target customer? Who is my competitor? Has the economy changed since last year? What should my inventory be? How much can I afford? How much should I spend on advertising and where should I spend it? What should be my staffing level? What is my cash flow indicating? And on and on and on. If you haven't asked yourselves these questions and maybe a hundred more, you are already headed for failure and if you have asked the questions and choose to answer by the seat of your pants, answering what ever comes to mind at the moment, you're not far behind. When should you ask yourself those questions? Certainly when you are starting up and putting your business plan together. Beyond that, on an ongoing basis, every time something changes; and certainly you should review them annually. Is this a lot of work? Not at all if your objective is the success of your business. You can't do with any less effort.

2.. POOR INVENTORY MANAGEMENT

There are two dangerous aspects of inventory management that often gets small businesses in trouble. The first is not replacing the inventory sold in a timely manner. The usual reason is shortage of cash. But when you do not replace the inventory you are slowly liquidating your business and at the same time obscuring the reason for the cash shortfall, a dangerous practice for sure. The other danger is not promptly disposing of slow moving or no moving inventory. Inventory is cash sitting on your shelves. If the inventory doesn't move, your turnover is down. Increasing turnover is one of the best ways to increase revenues without increasing expenses. Decide on your desired inventory turn and then keep track of it. If you want 6 turns a year, any product that hasn't moved in two months should be aggressively sold in order to use those funds to buy more saleable inventory. Look at your inventory. Is it right, is it moving and is it being replaced in a timely manner. If the answer to any of these is no, then you are getting ready to inflict some pain on yourself.

3.. POOR RECORD KEEPING

One of the constants in the small business world is that whenever a business fails, inevitably the records are in terrible shape. Tracking your sales, your expenses, your cash is a necessary and continuing activity at all times. Few people can make the right decisions necessary in business if they don't have the data. People who tend to run their business by the check book balance, often find themselves broke without even knowing the reason why. With today's available software, there is no reason not to keep your books up to date. Even with that you must know how to analyze the data. Recently I worked with a design firm with two offices. All of the company books treated the company as if both offices were one, not individual offices They had great data but they didn't know which office was making money or how much or where the expenses were being incurred. Ample data but poor analysis. A quick review indicated most of the profit came from one office. Now they had the information to make some strategic decisions.

4.. POOR CASH FLOW MANAGEMENT

Cash is the lifeblood that flows in the veins of the company. As I've often said in this space "When you're out of cash, you're out of business." Yet too many ignore this axiom. How much cash do I have? How much do I owe? How much is owed to me? What expenditures must I make next week, next month? When will I collect my receivables? It has often been said,"count the pennies and the dollars will take care of themselves". In some respects that is true but all too often the company that doesn't track their cash closely is doomed to fail. Don't divert cash to personal use. Record every penny of income and every penny of expense and understand what cash you'll need for the future. Most businesses that fail lost control of their cash long before the crash.

5.. POOR CUSTOMER RELATIONS

This area is particularly important in retail establishments, restaurants or other places where an employee meets the public. There are so many stories of rudeness, of failing to have knowledge of the products being sold, of failing to greet customers or making the sales experience uncomfortable or unpleasant. Why is it so difficult for some business owners to understand this? Your employee (and sometimes yourself) represents your company. Your employee must be knowledgeable, trained, courteous, and pleasant to deal with and in every instance unfailingly honest. Not doing so clearly puts your company at risk and it happens too often. The small business owner does not take into account the customer but rather does something that is only convenient to the company. Recently in a restaurant, the bill came to me with a list of what they called SLU numbers. It was impossible to check the bill against what we ordered. This was done for the convenience of somebody's view of how to account for all the checks. It was extremely customer unfriendly. Practices such as these, always self-inflicted, continue to amaze me. They forget that the customer is not always right but always have choices.

I continue to be surprised because this self-inflicted pain can be so easily remedied. The market place, the challenge for the customer, the creative genius of the small business entrepreneur is where the battle should be fought. But too many times we are brought down by friendly fire, the self-inflicted wound that can be fatal to the small business.

Ed McMahon, MBA, graduated from Villanova University, City University of N.Y and completed post graduate work at Stanford Univ. Graduate School of Business. Ed Has extensive experience as an owner, investor and counselor. He has taught Industrial Marketing at the graduate school level, bookkeeping and accounting at the business school level and for the past 11 years taught Understanding Small Business workshops at the Junior and community college level.He can be reached at usb@houston.rr.com