Owning a small business in Canada can be a dicey affair. You need to understand sales, marketing, accounting, and a host of other functions in order for your business to thrive.  One small misstep can lead to the eventual decline of your beloved business.

Avoid these 6 mistakes as a business owner and boost your chances of having a successful enterprise.

1. The boom and bust 

A key to building a sustainable business is to avoid vicious boom and bust cycles.  During a boom, when you are busy and sales are flying in, it can be easy to forget prospecting and marketing.  While you might be busy with contracts this quarter, you will need to prospect today in order to replenish your business in the following quarters.  This is particularly important if you have a long sales cycle.  Constantly develop new relationships and keep in mind that marketing your business isn't performed for today but rather for the future.  

2. Losing track of your financials

As you focus on sales, be aware that an increase in sales and profit is not necessarily what your business needs.  More important than new sales is the timing of your cash flow. As you know, a cash crunch will easily sink your business.  If you generate 5 new contracts this month, understand the timing of your cash for these contracts and how that will factor into paying your current liabilities.  Understand the flow of funds in your business and its impact on your operations.

3. Undercharging 

Many small business owners think a lower price will entice more customers.  If your target market is penny pinchers then you will have to carefully consider your pricing in relation to your competitors.  However, for the most part, life long customers will place an emphasis on value above price.  Meaning if your service or product provides enough value, price will be a secondary factor.  Low pricing can harm your reputation by making you look desperate, strangle cash flow, and dissolve your profits.  Instead of competing on price, work on creating value.  Set your prices high with an understanding a discount is a possibility.  It's far easier to offer a discount than to raise your price.

4. No Planning

Your small business should have a road map.  There needs to be an understanding of where you're going and how you're getting there.  A good plan will have clear, concise, and written goals. Milestones can be created to mark important steps along the way.  Without a plan, your communication will be unclear and mixed - sending confusing signals to your prospects and customers. Develop a distinct purpose for your business and share it with your audience.  Be intentional with your actions and use your purpose and plan as the anchor for decision making.

5. Underestimating Your Competition

It's a fact that consumers always have an alternative to your service.  The presence of an alternative strongly enforces the notion of knowing your competition and developing a unique selling position for your business.  While you should be keenly aware of your competitors, do not allow them to dictate your actions.  For example, if they choose to lower their price, beginning a price war is not necessarily the way to go.  Instead, emphasize value and other factors beyond price.  Also, keep in mind the alternative does not have to be a competitor - the consumer can walk away and elect to go without the service or product all together.

6. Buying Health Insurance

Buying traditional health insurance can be a costly mistake.  Insurance plans are expensive, restrictive, and complicated.  You are charged a monthly premium regardless of access or usage to the plan. There are deductibles. Items that you wish to claim are often restricted by an annual or lifetime maximum.  These plans eat into your profits.

Many business owners circumvent the challenge by opting to pay for their medical expenses out of pocket.  Laser eye surgery, orthodontics, and chiropractors are so poorly covered by traditional insurance that the business owner ends up paying for the expenses with their own after tax dollars.

Consider establishing a Health Spending Account for your business.  A Health Spending Account is an alternative to traditional health insurance that has been widely adopted by Canada’s small business community.  These accounts are established to exclusively pay for healthcare services for you and your family members.  Your business deducts 100% of the cost and you receive the benefits 100% tax free.

Are you a small business owner in Canada? Learn how to boost your profits and lower your tax bill by downloading our free Health Spending Account guide.