While there isn’t a single template for business success that we all need to follow, there are often numerous issues that can pop up or challenges to face for all entrepreneurs over the years as they run their ventures.
Regardless of the industry you’re in, what you sell, or how long you’ve had your organization up and running, there are some mistakes you need to do your best to avoid.
Waiting Too Long to Get a Loan or Investment
You don’t want to make the error of waiting too long to try and obtain a loan or some outside investment. Whether you want to use funds to buy some expensive equipment, cover inventory shortfalls during an expansion period, move into a new market, or acquire another venture, among other things, leaving applications until the last minute is not advised.
You might miss opportunities if you wait too long to compile paperwork for loan applications or investor pitches and to fill out forms and other documents. Alternatively, you might have to say yes to an investor who isn’t the best fit for you and your business or accept a loan from a company offering less-than-ideal interest rate terms or other conditions.
If you want to find an investor or utilize small business loans over the coming year, start researching your options now. Learn as much as you can about different investors or lenders and what they’re looking for, and you’ll be better positioned for when the time comes that you need some additional funds.
Failing to Save Enough Money for Leaner Times
Another financial mistake to steer clear of is not saving enough money for tough times in your business. While we all hope that growth is steady and continual and that issues don’t crop up along the way, as the global pandemic showed us, we never quite know how the world or markets could change and how our businesses can be affected in turn.
We must keep some savings aside to cover leaner times when cash flow can be an issue and we need to dip into such funds to cover expenses. There isn’t a set figure you need to keep for rainy days, but many financial planners and accountants, etc., recommend business owners or managers have three months of trading expenses or more sitting in a savings account to be available for contingencies.
Not Keeping a Close Eye on Cash Flow and Other Financial Matters
Many of us get so busy attending to the everyday operations of our businesses and handling problems that arise that we don’t spend enough time or energy closely examining the finances of our ventures. Sadly, this can lead to many issues, yet is a common financial mistake.
It’s vital to track and manage finances closely so you know your firm’s profit levels and how cash flows. You need to know how to read and understand essential reports and business numbers. For example, all entrepreneurs should be able to check the health of their business quickly by examining balance sheets, profit and loss statements, tax returns, income statements, asset and liability lists, and so on.
It helps to utilize handy tech tools to make this work easier. Online accounting programs and other apps can help you see, at a glance, how your organization is performing financially and help you spot and attend to issues that may be small now (such as decreasing profits or rising costs) but that could turn into more significant problems over time.
An error that doesn’t get talked about enough is underpricing. Although we often focus on not spending more money on things than we should in our businesses, we also need to ensure that we bring in as much money as possible. One way to do this is by raising prices.
Often, you’ll find that you’ve been setting your fees too low and thus aren’t earning nearly as much as you could be. If you haven’t raised your prices for services in years or arbitrarily set product prices without understanding your actual costs and how much the market can and will pay, you’re doing yourself and your venture a disservice.
These are just some of the top financial mistakes you must avoid in your small business. Others to try to stay away from are not submitting paperwork on time (e.g., to meet tax or human resources obligations), targeting too small a customer niche, and hiring incorrectly and leading employees poorly.
The more financial problems you can avoid this year and beyond, the more likely it is that you’ll have a thriving business and fewer headaches to contend with as a leader.