6 Small Business Money Blunders to Avoid at All Costs
When you final achieve your dream of launching a new small business, it is easy to get lost in the euphoria. All of your hard work and determination has come to fruition. You are your own boss and control the destiny of your company. However, that feeling of excitement can sometimes cloud your judgment. Entrepreneurs often run into financial obstacles after launching a new company, often as a result of hubris or poor foresight. If you want to protect your new business from financial miser, you need knowledge. Read below to learn about six small business blunders you should avoid.¬†
Counting on Imaginary Sales
According to Smallbizdaily.com, the most common mistake made by entrepreneurs is being too imaginative. Your creativity and daring determination may have launched the company successfully, but at some point you have to be realistic. It is foolish to assume that you will have the sales volume from month to month required to maintain cash flow in the business. There are going to be dry spells in sales, so you need to have capital aside from revenue to ensure you survive.
Growing too Fast
Even if your business comes out of the blocks with great speed, that doesn’t mean you need to start investing your money in new facilities, new equipment, or hiring more employees. All of those decisions require money up front and come with costs down the road.
Doing too Much Yourself
With the previous point in mind, there are dumb hires and then there are smart hires. A lot of small businesses get through the early years with one person at the helm. If there is one person you should hire, it’s an accountant. No matter how confident you are in your bookkeeping skills, it is a good idea to let a licensed accountant take care of your finances. You have enough on your plate already; let someone with a clear head handle the money.
Taking Unnecessary Loans
There is nothing wrong with taking out loans to help keep your business afloat, but be careful when doing so. Going to a regular bank or credit union presents a number of problems. First of all, you may end up getting an interest rate that is too high. That could sink your business when the time comes to pay up on the loan. Additionally, you might find a lender willing to give you more money than you really need, which stretches your finances too far and poses an equally dangerous threat when compared to high interest rates.
If you absolutely must seek out a loan, consider looking for a bad credit business loan on reputable and known sites like badcreditbusinessloans.com. The application process can be quick and you can get the cash you need to grow without risking your future.
Mixing Business and Personal Funds
Your personal money should always be kept separate from your business funds. Your spouse’s income and the paycheck you receive from a side job should not be diverted to keeping your business afloat. More importantly, as QuickBooks notes in it blog, you should go a step further and protect your personal assets. Structure your new company as a corporation or LLC so that it as an entity, and its debts, are identifiable as separate from you as a person (and your personal finances).
Ignoring a Business Plan
Before you launched your new business, you undoubtedly crafted a business plan to help guide you through the early years. There is a reason you took the time to create a business plan. It not only provides a path for you to follow through the startup phase, but it also serves to keep you focused on long-term goals as you get the business up and running. Adhere to the financial roadmap you developed in this plan.
Jason Taylor has made his share of business mistakes over the years. A longtime business owner, he enjoys writing about the things that have helped him throughout the years. His articles appear mainly on business and finance websites and blogs.