And how you can avoid them

Life as a small electrical contractor means dealing with a full measure of challenging decisions, any one of which can have a negative impact on your operation. Even if you have a trusted and experienced support person or group, the weight of the final decision rests squarely on your shoulders.

The good news is you don’t always have to be a trailblazer. Even problems that appear to be unique to your business have likely been dealt with successfully by thousands of your predecessors. Of course, many others have suffered the consequences simply because they took the wrong turn at a fork in the management road.

Here are six ways for you to avoid some of the most common mistakes made by those who have traveled that road before.

1. Trying to do it all yourself

You have heard it said many times—if you want something done right, do it yourself. However, when it comes to electrical construction, too many owners suffer from a dangerous overdose of do-it-yourself-itis.

A failure to understand the importance and the necessity of delegating is one of the most common mistakes that hinder growth in small businesses, according to experts.

“Just because you can complete a task, doesn’t mean you should,” said management consultant Andrea Michalek. “Anything that is not a core competency of your business should be outsourced. Without hiring any additional employees, it’s now possible to get the outside help you need at prices you can afford.”

“Some business owners go broke saving money,” said consultant Wally Adamchik. “Rather than outsource their Web design and maintenance, for example, they do it themselves, because they can. Of course, this takes them away from high-impact work like marketing. They are saving money doing their own Web thing, but they are losing money in the long run by doing it.”

If you find yourself neglecting some of the basic responsibilities of your business, such as marketing and customer relations, it is probably time for you to put more trust in other people. Given a chance, many will surprise you with positive results.

2. Failing to understand the true meaning of marketing

Many contractors are so busy dealing with day-to-day operations that they never get around to putting together a business-building marketing program. That is a serious mistake. Marketing is a basic building block in the construction of any contracting business. Yet, many owners shy away from all but the most obvious ways to promote their businesses. For some, their entire marketing program consists of an expensive ad in the Yellow Pages.

While advertising is an essential part of marketing, it is only that—a part. An effective marketing program requires much more than advertising. Marketing embraces all facets of your operation. To be an effective marketer, you must nurture and promote your business image, sell yourself as well as your business, and concentrate on making every client a satisfied customer. There is no other way. Competitive prices alone won’t do it. A high degree of technical skills alone won’t do it.

Marketing is a complex fabric woven of many threads. Every serious contractor should spend a reasonable part of their time learning what goes into the makeup of a complete marketing program.

Too many small business owners stammer when asked, “So what do you do?” Michalek said. “Referrals and word-of-mouth marketing are two cost-effective methods to grow any business. If you cannot succinctly express what you do and whom you serve, you’re shutting the door on your best source of new customers.”

3. Failing to take action on unsatisfactory employees

Discharging an unproductive or disruptive office-based employee is the sort of unpleasant task that most owners dread. However, failing to take action when necessary can be a costly mistake.

“Not firing a problem worker is one of the worst operating mistakes you can make,” said James Walsh, author of “Rightful Termination: Defensive Strategies for Hiring and Firing in the Lawsuit-Happy ’90s.” “It keeps the problem worker around to create more trouble, making a bad situation worse. That’s not fair to you or to your other employees.”

A single problem employee in a business with a dozen or more employees can represent a serious threat to productivity and profits. In a smaller operation, it can be deadly.

“Failing to terminate a problem employee can result in added stress on other employees who may have to take on more work, and dissension among those who can’t understand why the employee is being kept,” said management consultant Linda Hanson. “All of this, in turn, can negatively affect the treatment of clients.”

In short, once you identify a disruptive or unproductive employee, it’s best to face up to the unpleasant task of terminating the relationship. Postponing it can only lead to a more serious problem later.

4. Failing to follow the principles of profitable cash management

Making the sale is only the first part of a profitable business transaction. How you manage the revenue generated by your sales will have a great influence on how much of that money finds its way to your bottom line.

Profitable management of cash flow calls for never allowing any of your money to lie idle. The worst place to deposit your daily receipts is in a low- or no-interest checking account.

Instead, open a money market account at your bank and have it linked to your checking account for telephone or online transfers. From that point on, deposit your daily receipts into the money market account where they will immediately start drawing interest.

Never deposit receipts directly into your checking account. Keep a minimum balance there and transfer cash by phone or online only as needed to cover checks written.

Worst money sin of all: Leaving checks or cash lying around in a desk drawer until you can get to the bank.

Using every cent of your money to make money is the smart way to bolster business profits.

5. Failing to ask for outside help

“By their very nature, entrepreneurs are independent thinkers,” said Carl Robinson, Ph.D., a Seattle-based management consultant and psychologist. “That’s why they are often reluctant to reach out to others for help in areas where their own experience may be lacking. I feel that any small business owner will benefit from forming a peer group made up of owners of local small businesses. This is an excellent way for a business owner to benefit from a no-cost advisory board. In a successful peer group, everyone helps everyone else through the exchange of experience and ideas.

“A good place to locate potential members of a peer group,” Robinson said, “is one of your local service clubs such as Rotary, Kiwanis or Lion’s Club.”

6. Failing to develop good hiring skills

Different issues pertain to hiring in-office or management staff. When attempting to acquire your accountants and support staff, interviewing is important.

“One of the most common mistakes small business owners make is hiring poorly,” Robinson said. “Most small business owners have never received any training in selection and assessment of people. As a result, they tend to fall victim to every interview bias error known. If you make a poor hiring decision when you have less than 10 employees, you can be derailed big time.”

Robinson suggests these interview strategies:

Prepare interview questions in advance. Take notes, so you won’t forget what the candidates said. It is easy to forget what the first interviewee said or mix his/her responses with subsequent interviewees if you don’t take notes. Ask each candidate the same questions, so you can compare answers and more accurately compare the candidates.

Don’t make a hiring decision based on your first interview. Take your time. Compare candidates.

Make the candidates feel comfortable—they reveal more if they aren’t on guard. If you make the interviewees feel like it’s an interrogation, you’ll know how they respond to questioning under pressure. However, it is unlikely they will tell you much revealing about themselves because they will be on the defensive.

Sell the candidates on the job and you, but let the candidates do most of the talking.

Ask open-ended questions. Avoid those that can be answered with a yes or no.

There is, of course, much more to skillful hiring techniques. Author Walsh advises starting with what hiring experts call structured questions.

“Ask them of every candidate and base your comparisons on their answers.” He suggests using a standardized worksheet to do this, checking off each applicant’s strengths against the job skills required for the position.

Of course, these six missteps are not the only management errors that can negatively affect your business. However, steering clear of them can go a long way toward optimizing your bottom line.  EC

LYNOTT is a former management consultant and corporate executive who writes on business and financial topics for consumer and trade publications. You can reach him at lynott@verizon.net or www.blynott.com.