From the March 2007 issue of Entrepreneur

Businesses perish in untimely ways, many of which are largely out of an entrepreneur's control: There's too much competition. The public is no longer interested in your product or service. You're a victim of bad luck--you opened a business on the Gulf Coast a few weeks before Hurricane Katrina hit. Maybe a trusted employee has been cooking the books, or a family crisis is dragging you down.

But sometimes, the painful reality is that a business falls apart for one reason: you. In the end, when any company is suffering, there is a question every entrepreneur must ask when he or she looks in the mirror: Am I killing my own business?

We asked a number of experts for their thoughts on how we most commonly shoot ourselves in the foot. Although there are probably 500 or more methods to murder a multinational or strangle an S corporation in the dead of night, we agree that there are five ways it's most likely to happen.

Micromanaging
As the saying goes, the first step is recognizing you have a problem. Fine, but what are the signs? Margaret Morford, owner and president of The HR Edge, a management consulting firm in Brentwood, Tennessee, points to several subtle signs that your micromanaging is out of control. For instance:

  • "The people who work for you always present problems or issues, but never offer solutions," Morford says. The employees are probably wondering why they should bother when you always have the solution.
  • You have unusually high turnover.
  • No one ever turns in a project to you that you don't change in some way. "After a while, people will begin to turn in sloppy work because they know you are going to change it anyway," says Morford.

Rich Enos, co-founder of Boston-based StudySmart, a service that offers one-on-one tutoring for kindergarteners through 12th graders, recognized some of those signs (like high turnover) and soon learned his employees felt micromanaged. When Enos and co-founder Greg Zumas, 31 and 29, respectively, launched StudySmart in 2000, they did everything in the business. Naturally--they were a startup with no staff. But long after they added employees, they kept doing everything.

Enos and Zumas feel they've solved their problem of micromanaging by--you guessed it--micromanaging how they micromanage. Nowadays, Enos says, Study-Smart employees:

  • Understand what is expected of them through clearly defined goals.
  • Receive the training and resources needed to accomplish their goals.
  • Are given room to work toward those goals.
  • Report and assess progress toward their goals.
  • Expect coaching and additional oversight when it looks like performance will fall short of their goals, and recognition and increasing autonomy when goals are achieved.

Their several-step solution might look cumbersome, but if it allows the founders to focus on giving the staff room to work, that's the important thing. It seems to be working: StudySmart's employee retention is up, the company has opened offices in seven cities throughout the United States, and 2006 sales were approximately $3.2 million.

Whatever you do, it takes discipline to stop micromanaging, especially if you've trained your staff to come to you when there's a problem. When that happens, Morford offers an idea: "Every time someone presents you with a problem or issue, ask them, 'What do you think we should do about it?' If you do not like the suggestion, ask this as a follow-up: 'If we did that, what would you do about (fill in the blank here)?' Give them time to think. They will either fix your greatest objection, in which case you should implement their suggestion, or they will offer another one."

Spending in the wrong places
Peter D'Arruda, author of Financial Safari, has some advice for those trying to expand their business on limited funds: "Baby steps are more important than giant leaps. The old story The Tortoise and the Hare could be no clearer: Don't run when you can walk."

  • Work space: If you're in retail, "Perception is reality, and 'location, location, location' is the common saying," says D'Arruda. But if you can move into less expensive real estate without customers caring, why not?
  • Employees: "If you need the help and can justify the costs of hiring someone [new], by all means, hire away," says D'Arruda, but he adds that each employee brings about various forms of charges, from Social Security to workers' comp, so you need to factor those in when hiring new staff. "A good rule of thumb is that if you hire someone for $10 an hour, the true cost to you will be anywhere between $16 and $20 an hour after all the employee-related expenses."
  • Trade shows: "Many business owners get caught up in all the hype and glamour and 'specials' at these events and overcommit and purchase way too much," says D'Arruda. "Overordering can kill a business quickly."

It's helpful to know why you're spending money on items you don't need. You may be a victim of "expertise-creep," according to Jim Stroup, a management consultant and the author of Managing Leadership. It's the same malady that plagues micromanagers. "Entrepreneurs who have had an idea take off . . . sometimes, in the glow of the apparent validation of their wisdom, assume that that wisdom extends into every area involved in the business," says Stroup. "From marketing to accounting to operations and management, your pointed disregard of your friends' and advisors' suggestions can become pig-headed and self-destructive."

Chasing after every customer
It's a waste of resources to put all your time, energy and money into chasing after every possible customer. It's the "ideal customers" you should be trying to reach, says Michael Lovas, founder of About People, a Colbert, Washington, consulting and training firm that specializes in helping companies and entrepreneurs better understand, attract and connect with their clients.

Lovas says you should studiously attempt to learn what your more consistent consumers like about the products or services you offer. Make obtaining specific feedback from customers your priority, and whittle all that information down to the top three or five values--you'll eventually learn the most important quality that attracts customers to your company. "Once you have those words and phrases, you can begin to craft your marketing so that it is targeted specifically to people who value what your product or service represents," says Lovas.

What you really want is for your regular clientele to think of you as a partner in their life, rather than--to be blunt--a huckster hoping to make an easy buck off them. Olivia Fox Cabane, author of The Pocket Guide to Becoming a Superstar in Your Field, warns entrepreneurs about "trying to sell customers on anything. It's the fastest way to ruin a client-customer relationship before it even begins. People don't want to be sold to."

Relying Too Much On Key Employees

Pam Holloway, Lovas' business partner, counts the ways dependence on one key employee can be disastrous: "They could leave for another job, [or be the victim of an] accident, illness or death. Most companies don't think about this, but it happens all the time. We worked with a paper company where a critical employee in accounts receivable had a heart attack. The entire receivable process shut down because so much of the critical knowledge was in his head."

Of course, if you're suddenly realizing that you do rely too much on a key employee, you're probably wondering, "How do I fix that?"

Holloway asks, "Do you reward key employees for sharing knowledge and helping others? Or do you reward them for getting things done?" She points out, however, that your staff might see sharing techniques with colleagues as a way of taking themselves out of contention for a future corner office. She also adds that it takes time for one employee to teach another without their own performance suffering, so you have to make it as easy as possible for them.

Jim Crystal, chairman and CEO of Frank Crystal & Co., a prominent insurance company in New York City, recommends getting key person insurance, which protects businesses against the financial devastation that could occur if a crucial employee is suddenly put out of commission. As Crystal argues, "Corporations should view key person insurance as an investment in employees, as well as in the company's future business success and endeavors."

Not being on top of your numbers
Phil Wilkins, a Lexington, Kentucky, consultant and author of Own Your Business, Own Your Life: 21 Strategies for Becoming a Wealthy Entrepreneur, has a number of suggestions for staying on top of your financial performance. Most of them revolve around the unfortunate fact that if you aren't financially minded, you need to become financially minded--or at least hire someone to be your CFO.

But if you're willing to crunch the numbers yourself, Wilkins recommends holding regular meetings to review sales figures and expenditures. Wilkins, who owns three businesses, including Diverse Wealth Systems, a training and consulting firm, conducts weekly manager meetings and personally reviews sales figures daily.

He suggests investing in a large personal planning calendar and placing major bills on the calendar each month, from payroll and supplier payments to sales taxes and rent or mortgage. Continually work with your bank or financial institution to get the best loan rates possible.

"Negotiate everything," Wilkins urges. "A business owner is a very valuable client to a financial institution, [and] you can leverage that to your advantage by demanding things such as private banking, estate planning and reduced mortgages for your home and business, all while improving the cash flow in your business."

See, it's all connected: Learn not to spend money in the wrong places, and you'll be more on top of your numbers. Micromanage less, and you may wind up with many knowledgeable employees instead of one or two. Stop chasing after every customer, and you won't be spending money in at least some of the wrong places. The bottom line? Improve thyself, improve thy business.

Personality Conflict
Sometimes, the very thing destroying your company may be the simple fact that you're not a people person, observes Terry Bacon, business coach and author of What People Want: A Manager's Guide to Building Relationships That Work. "I've seen it a number of times," he says.

Mostly, he sees micromanagers. In surveying 500 employees for his book, he found that 87 percent wanted their boss, more than anything, to trust them, "and being a micromanager absolutely violates that." But there are other personality traits to avoid: the "my way or the highway" persona, investing no emotion or warmth when dealing with employees and colleagues, and being an egomaniac.

The first step in changing is awareness, says Bacon. "You have to be aware that you are the problem." Bacon recommends using a business coach when trying to fix a personality flaw, but he says any sort of mentor or confidant will do, provided this person can be truthful "and help you hold the mirror up to really see yourself and what's going on."

Bacon suggests casually sitting down with every employee, or at least the core ones, and discussing your relationship. You need to ask: How are we doing? What's working and what's not? "What you're trying to establish is an open dialogue, where your employee feels free to give feedback and knows you're not going to lash out at them," he explains. "That's one of the best ways to really understand how people see you."

Geoff Williams is a writer in Loveland, Ohio.