Lots of entrepreneurs will make mistakes when starting their first business. That is the case regardless of whether you’re male or female. Sometimes you need advice from the experts if you want to succeed. For that reason, we wanted to publish a post that highlights the most common errors. With a bit of luck, reading about them now will help you to avoid them in the future. You can also put strategies in place to ensure these oversights never affect your operation. Whatever your company does to make a profit, the same rules should apply. You might just have to tailor your approach with your business model in mind.
So, you’ve decided to take the plunge into the start-up world. Congrats! You’ve probably heard a lot of entrepreneur advice, but it’s equally helpful to hear about common entrepreneur fails.
In this article, we’ll cover the most common financial and other mistakes that entrepreneurs make, from assuming too many high fixed costs to not separating personal and business accounts. Being informed now can save you from having to look into bad credit debt consolidation loans later. Keep reading to learn more.
Common financial mistakes
1. Having high fixed costs
Your fixed costs are expenses that you owe every month, like your mortgage payments or team’s salaries. If you have too many high fixed costs and not enough clients/income, you’ll quickly wind up in debt. Be deliberate in deciding which fixed costs you need, and which aren’t necessary. For example, if you require an office, do you really need a penthouse office in Times Square?
However, not all costs are bad. For example, trying to save money by hiring lackluster talent will only hurt you in the long run. Be lean but strategic with your fixed costs.
2. Not creating a budget
You should know exactly where your money is going on a daily, weekly, monthly, and yearly basis. Even though, as a founder, you’re being pulled in a hundred directions at once, establishing and sticking to a budget is one of the most important parts of your job. A realistic budget can help you keep your business healthy and sustainable.
3. Not planning for taxes
Remember the old days of being a full-time employee, when you didn’t have to think about taxes? Those days are long gone. Now that you’re self-employed, it’s on you to pay your own taxes. You’ll need to give the IRS estimated quarterly payments. Otherwise, you’ll find yourself dealing with an enormous and unwelcome bill come Tax Day.
4. Being too optimistic
Don’t get us wrong. Being optimistic is great. However, as an entrepreneur, it’s important to also be a realist. As a blindly optimistic founder, you run the risk of underestimating your costs and overestimating your revenue. Balancing your rose-colored glasses with real-world scenarios can help you avoid mistakes. Remember: expect the best but prepare for the worst.
5. Making big personal purchases
Things are going well for your business, so you decide to upgrade your car and buy a new house. Not so fast. Scaling up your personal life too soon can be a recipe for disaster for a couple reasons.
#1: If your business goes through a tough time, you’ve tied up resources that could be used to help your business on yourself.
#2: By the same token, a failing business may result in you defaulting on all your fancy new purchases if you decided to finance.
Bottom line: Keep your business AND your personal life low-cost.
6. Not separating business and personal accounts
If you don’t separate your business and your personal accounts, you’ll be in for a world of tax implication and recordkeeping pain. It can also put you at risk for being personally liable for lawsuits. For example, if your business gets sued and your business and personal accounts are mixed, you could be personally exposed to any damages incurred.
Avoiding these 6 mistakes can your start-up flourish instead of flounder. Avoid high fixed costs, create a budget, plan for taxes, be realistic, don’t spend like crazy on yourself, and keep your business and personal accounts separate. Stay calm and start-up on.
Other common mistakes
Not making use of social media
When it comes to promoting a new venture, you’ll want to keep expenses as low as possible. However, you still need to reach as many people within your target market as you can. Considering that, you should always use digital marketing practices as part of your strategy. Social media websites offer many opportunities to someone in your position. A quick Instagram search will highlight all the top influencers using that platform. You can get in touch with some of them and pay them to promote your brand. Maybe they could wear a t-shirt that contains your logo? Perhaps they could hold one of your products in a photograph? The possibilities are endless. You also need to focus efforts on Facebook and Twitter for the best outcomes.
Not creating a plan for growth
If you take no other advice from this page, you must create a growth plan right now. Only then will you know the perfect times to expand your operation. The document should include information about profit milestones, and how you plan to spend your income. Unless new information surfaces, you should stick to the plan 100%. If you’re confused about the best ways of creating that strategy, you can employ the services of business advisors. There are also lots of free templates available online that should point you in the right direction. At the very least, it should detail all the moves your company plans to make during the next three years.
Not keeping a close eye on your accounts
When you’re busy running a business, it’s easy to overlook your accounts. Of course, you’ll use specialist software to record income and outgoings automatically. However, you still need to keep a close eye on your balance. Failure to do that could mean you overspend and leave yourself without enough money. That could result in you being unable to pay staff or suppliers. When that happens, you only have a couple of options on the table. In most instances, you will have to get your operation into debt if you want to continue. That is not a wise move for anybody.
Do yourself a favor and ensure you learn from the information on this page. If you make any of the mistakes listed above, you’ll only have yourself to blame. At the end of the day, you will encounter many different stumbling blocks as your company progresses. It’s your ability to identify and overcome them that will determine your level of success.
By Stefanie Gordon
Stefanie Gordon is a content strategist with over a decade of professional writing experience. She is a former financial journalist who has spent the last several years working in digital marketing. She specializes in content strategy and creation for large and small businesses in finance and technology.
