Starting a business is an exciting time no matter who you are. You finally get the chance to be your own boss. You can begin to chase your goals and dreams; you can carve out your niche and build a reputation in the industry. However, as exciting as starting a business can be, it also comes with its challenges, and arguably one of the most significant of these is the financial aspect. Failure to carefully consider your finances can put you in trouble even before you begin, so you must avoid the most common mistakes.
There's an idea in business that you must overestimate every single cost. This prevents you from going over budget when the bill arrives. However, anyone unfamiliar with business costs often underestimates how much they will need to spend, putting them in financial trouble from the off.
What's more, start ups often forget to consider their burn rate (how much existing capital you use every month just to keep things running). Failing to consider this will effectively halt your company in its tracks. You might end of making purchases that make it impossible to balance your operating costs.
Working out your own finances
Unless you're an expert in finance, no business owner should work out their finances. Even if you think you're good with numbers - and how hard can it be? - you're still human and therefore prone to error, such as miscalculating or missing essential factors.
Even if you think your business can't afford to bring in as a dedicated CFO, you'll still need to find a way to manage your finances every month. This includes assigning your salary and that of your staff. There are financial software options that can help. Outsourcing is also another useful and affordable way to ensure there are no severe financial discrepancies.
Failing to understand your market
Failure to gain a thorough understanding of the market means you will over (or even under) price your products or services. This can have serious ramifications for your success and your finances.
Customers will avoid purchasing from you if they think your products are too expensive, especially as a start up with no reputation. On the other hand, if your products and services are priced too low mean you'll fail to regain your investment. Before making any decisions, make sure your carry out thorough research, look at your competitors, and understand the model customer you want to appeal to.
Not valuing your employees
Start ups are different from established corporations. Many small businesses consider themselves like a family. They must accept that, as a start up, things may not run as smoothly as they would like. This is all part of the experience and a crucial thing that fledgling businesses must deal with. However, that does not mean you shouldn't value your employees.
The very best talent must know you appreciate them; otherwise, they could go elsewhere. This does not have to be complicated or expensive to do. Measures ranging from a simple 'Thanks' to an occasional extra day's holiday, a small bonus or flexible measures like 'dress down Friday' can all go a long way to letting employees know you value their contribution.
This also means acknowledging that employees have lives outside of the business. Failure to do so will drive the finest talent away. Services such as MyKeyManInsurance.com can mitigate some of the damage this can cause.
Expecting things will get better
The idea of a start up CEO ignoring the problems around them and expecting that things will get better is a cliche. It's something you see in movies or TV. However, it's a cliche for a reason, and with so many start ups crashing and burning every year, it's something you should look out for.
While it might be comforting to expect things to get better, they very rarely do. If you recognise that your finances are not healthy or your product is not attracting attention, you must do something about it immediately. Failure to do so runs the risk of your business collapsing, putting your staff out of a job and affecting your personal and professional finances.
Refusing to make the most of technology
Technology is designed to make our lives easier. As a start up, you must do what you can to embrace technology in as many ways as possible. You don't need reminding that launching a start up can be expensive and stressful. Technology will relieve some of these burdens and make things more manageable.
Rather than spending time booking appointments and analysing marketing data, which is costly and pulls people from other projects, consider how automation can help. For example, teleconferencing removes the need to travel all over the country and allows you to embrace remote working, saving on office space and costs.
Trying to grow too quickly
Some businesses get a taste of financial success and believe they can conquer the world. This gives them excessive confidence and they attempt to expand too quickly. They bring in more staff; they look to diversify their services and offer new products. But this all comes with more expense, and if your finances are not stable enough, it can be catastrophic.
You will need to consider your research and development. You may need to increase your office space. There will be more salaries to pay and additional marketing costs to promote the new product. The more you want to promote, the greater the costs so only do so if you can afford it.
Forgetting to set your goals
All businesses need financial goals if they want to succeed. These goals can be a measure of success. You can look back at your finances at the end of every quarter to see what you achieved and whether it met your expectations.
Failing to set these goals means you have nothing to compare your results with. While earning a certain amount might seem reasonable on the surface, the reality could be much different. By outlining what you want to achieve, you can get a clear idea of whether the quarter or year was a success.
You aren't expected to know everything about running a business, especially if this is your first foray into entrepreneurship. Every mistake is a chance for you to learn. That said, some mistakes can be more damaging than others and they could spell financial ruin before you get the opportunity to succeed. By avoiding these financial mistakes, you immediately put yourself in a stronger position and can focus on growth.
Copyright 2020. Article was made possible by site supporter Jeremy Bowler