You finally did it: you started your own business, you are your own boss and excited about the company’s future.
To keep this dream job alive, you will need money. What you want is to keep yourself on a strict budget so that you have resources and wiggle room to conquer any inevitable problems.
From this excellent Entrepreneur article by Lauran Entis, here are the six financial mistakes that many small businesses make:
- Overpaying on Taxes
Every business has to pay taxes, but due to factors like a lack of understanding the system, poor tracking of expenses, and a fear of underpaying all result in many small businesses overpaying.
Here is how you avoid this error: keep a library of receipts for payments and expenses. Account for every penny, no matter the amount you spent, even if it was $1 to buy a roll of tape at the store.
2. Spending like your competitors
Even if your competitors spend lavishly, that doesn’t mean your business needs to do the same to remain competitive.
Keep profitability in check before hiring new employees, consultants, and paying your salary. By spending within your means, the time will come when your company can afford any resource under the sun.
3. Purchasing Unnecessary Items
It can be exciting starting a new business: getting an office space, new desks, and a fancy new soda machine — Wait, what?
Make sure that you’re spending money on things that are necessary. Initially, you don’t want to spend money on items that won’t have any return for your company. To ensure you are spending wisely, before making a purchase, ask yourself, “how is this going to help the business?”
4. Diversifying Prematurely
Your company is now thriving, and you think that the next step should be entering into different markets; however, it still may be too early to diversify.
What does it mean to diversify? It means to start spreading your business ventures outside of your original target industry.
Before you start casting the net too widely to put money and time into building something new, you have a few questions to ask yourself such as “What is my goal?” and “Am I ready to handle this?”.
5. Being Busy vs. Being Productive
Being busy and being productive seem very similar, but the reality is they are two different things.
Are you running around doing too many things rather than focusing on the crucial tasks that will help your business thrive?
Productivity means to consciously expend your energy on important tasks. To solve this problem, gather your team and talk about your company’s strategy for success — this way everybody will consider how they spend their time and figure out if their actions are crucial to the success of the business.
6. Not Having a Safety Net
The cash flow for your business will never be consistent: you will have highs and lows. To “be in the black” means your company is successful because, at the end of the month, you have positive earnings!
But this is also the moment to be careful: rather than giving yourself, or your team members, a bonus you should put that extra money in the bank as a safety net. This way, when your company is in a rough patch, you will still have money to fall back on. A good rule of thumb is to have at least two months worth of operating costs saved up to help your company get through difficult times.
The seventh financial mistake is undoubtedly losing time and money by not having the right business software! CUE’s curated marketplace can help you find the small business software you need to make your company profit. Check us out!