6 Pitfalls for Business Owners and Executives

Being the leader of a business – whether it’s one you own or run as an executive – requires constant self-evaluation and objectivity. It is a true balancing act, and there are rarely straightforward guides or performance evaluations to tell you where to go next. Such is the work of a leader. If you can be mindful of the 6 pitfalls listed below, it’s a step in the right direction. Personally, I find these situations to be extraordinarily subtle – you may have mastered them in one stage of your business, and then find you begin to lose awareness of them as time passes – so they’re always something to keep in mind:

1) Personal Overspending That Affects The Business

Your business is what’s paying your salary, so you better make sure it’s financially secure before paying yourself enough to afford another yacht. Out of control personal spending – and that is a completely personal definition – can lead to personal greed, debt, and living an unsustainable lifestyle. As a result, your judgement will be clouded in your business. You’re no longer deciding what’s best for the company, you’re deciding instead what’s going to get you the next loan payment. While some argue they’re one in the same (“my interests are the business’s”) – they aren’t. One is long-term thinking, and one is short-term and mostly selfish. If you think you can’t live frugally, or it’s just not the thing to do for a respected executive or business owner, take a look at Warren Buffet’s personal spending.

2) You’ve Stopped Learning

Nobody who has accomplished great things in business did so only with the knowledge they accumulated in college. Great leaders are great learners. If you’ve achieved status in your profession, it’s easy to determine that you’ve done so based on your prior education, and that your learning is over. This couldn’t be further from the truth. For the good of you, your employees, and your company, find your weak skills and learn to make them stronger. Coasting on self-education and assuming you “know it all” will only be at your peril.

3) Lack of Humility

Your title: owner, founder, CEO, president – whatever it is – is just a title. It’s there for legal and essential business reasons so people know who should be signing paperwork and making decisions. Believing that it makes you more valuable, important, or entitles you to treat people differently will only come at the cost of your business’s success. It will make you distant and unrelatable by your employees, clients, and partners – meaning you won’t be able to work with these people or lead them very effectively. A humble leader is affable, and able to win the trust and followership of those around her. The former attitude can also lead to a lack of objective, clear thinking. Decision making is instead driven by ego, rather than sound logic. This type of behavior has singlehandedly destroyed great companies:

4) Escalation of Commitment / Sunk Cost Fallacy

The principle of Escalation of Commitment (or Sunk Cost Fallacy) says that as investments mount on a doomed project, people are less likely to give up and move on despite obvious signs of failure, simply because of the amount of prior investment. As a result, vast amounts of future resources are dumped into dead projects based on poor decisions made in the past. This is closely tied with the point before, which is that you must remain clear-headed and objective in your decision making at all times – a great leader shouldn’t fall victim to psychological pitfalls like an Escalation of Commitment / Sunk Cost Fallacy. Keep humble, and be cognizant of the viability of your projects, regardless of past investment.

5) Micromanagement

There’s a fine line between leading a team to ensure great quality, and gumming your team up by micromanaging a project to death. This requires a lot of self-awareness on a project-by-project basis – some will require more active management, others less. One key point to keep in mind is that you made plenty of mistakes trying to start your business, so allow your team to make their own mistakes. It won’t be the end of the world, and certainly not the end of your business.

6) Frequent Absence

At some point in our career, we’ve had the boss or met the owner who just wasn’t there – be aware of this concept, and don’t become it. Your business needs a leader, and one who is present. During a successful period, your business may get on fine without you – you can come in 3 days a week, put in light hours, or work on personal side projects, and it seems the business runs itself. Eventually, this will no longer be the case. Your top talent – the people that actually run it for you – will leave for greener pastures, and a more involved leadership. Or, more likely, they’ll start their own business. Your competitors will advance in the field while your business treads water without a leader. If you love your work, and your business, you’ll be there.

These are pitfalls: dangerous situations that don’t present themselves until it’s too late. They’re subtle traps. It takes incredible self-awareness to recognize these weaknesses before they become full-on problems for your business, but with practice and mindfulness, none of them will surprise or get the best of you.

Want the inside track on my latest ultra-efficient business hacks and tips? Follow me on Twitter @DenODonnell – I share my favorite business content on Twitter, usually before I get to writing an article about it on Starterist!