LATEST POSTS

Thursday, May 4, 2017

5 Biggest Money Mistakes New Entrepreneurs Make

Starting your own business is not an easy thing to do and you have to be careful, especially in the early days when your company is still on wobbly legs. Most importantly, you must not make money-related mistakes as they can easily destroy your new enterprise if you are not careful. 

Today, we will be looking at the most common and dangerous money mistakes new entrepreneurs make.

Taking out bad loans

There is a very simple reason why banks give out loans. They make money off those loans. They do not give out loans because they are run by nice people who want you to succeed. This being said, this does not mean that you cannot find a good loan for your new enterprise. You only need to be spectacularly careful.

If you are bent on going to a traditional bank, then make sure you shop around and visit at least a few different banks. Compare their small business loans and work out which will work out best for you. There are, of course, alternative ways of financing your small business, but you need to be careful here too.

In short, when borrowing money from any kind of an organization, do your homework and only take out a loan when you are certain you will be able to repay it in full and in time.

Not having a comprehensive business plan

A business plan is an outline of how your new enterprise will be making money. Your business plan needs to cover the costs you will incur while doing business and the revenues you would be generating. You will also want to factor in the taxes and the repayment obligations on any loans that you might have taken.

There are a few ways in which new entrepreneurs mess up their business plans and you need to avoid these. For one, you cannot be over-optimistic about your market and how much money you think you will be making. Do your market research and always work with conservative numbers. Also, you have to calculate your expenses properly – office space, employees, day-to-day expenses, taxes, licenses, etc.

Without drawing up a really thorough and precise business plan, you are inviting disaster, short and simple.

Spending too much on offices

The ‘offices’ from the title of this section of the article also entail other kinds of business spaces that your new enterprise might entail.

Which brings us to the next problem – spending too much on the business space.

Since you are most likely to be renting out space for your new enterprise, you need to make sure you are only spending as much as you have to. If you can fit everything in 400 square feet, do not rent out 700. If you do not have to be in a busy neighborhood, don't waste money on prime locations.

When negotiating office space rental, it is also very important that you do not go into any long-term deals, especially if you believe that your company will grow quickly. This way, in future, you might have to continue paying for a space that can no longer accommodate your business.

You should also be very careful about the costs of furbishing your new enterprise. Some new entrepreneurs think that it is important they have the latest office furniture and all the latest technology. This is simply not the case.

Remember, you are in for a long game.

Splurging on software

Depending on the type of business you will be doing, there is a great chance that you will need to start using some kind of business software. After all, this is the 21st century and it is hard to imagine most offices nowadays operating without some kind of software.

Even if you are in the service industry and running a restaurant (for example), you will still be using some form of software, like an accounting or a shift scheduling software.

The important thing here is to be very careful and do your research before you commit to any solution. If you discover that you will need project management software, do a comparison of project management tools. If you find out that you cannot work without accounting software, you will once again do a comparison and find the solution that fits your needs the best.

Sometimes you will find great free options and, at other times, you will realize you have to pay. The important thing is you do not go overboard before you exactly know what you need and want.

Hiring the wrong people

It may seem that hiring the wrong person has nothing to do with money, but once you realize how much it costs to hire a wrong person, you will understand how important it is to get your hiring right. 

When you hire a wrong person, you are entering into a relationship that will all be bad for you. First of all, you will be incurring costs in training and onboarding the employee. They will pick up very little since either they are not interested or do not have the capacity to learn. 

Then, you will be paying them for months of subpar work in the hopes they will get better or become more engaged. After a while, they will either leave you or you will be forced to let them go. 

Either way, you will have to hire a new person and go through the entire process once again. 

It is because of this that hiring a wrong person can turn out to be a very costly affair for you and you need to avoid such a situation by planning your hiring carefully and skillfully.

Closing Word

Keep an eye out for these mistakes and try to do everything in your power to avoid them. If you do, you should be able to lead your new enterprise towards profitability and growth.

Thanks for your time!

AUTHOR: James D. Burbank is the editor-in-chief of BizzMarkBlog. He spends his time between Australia and Europe and he consults SMBs on marketing and smart business software practices.

Share this:

Post a Comment

 
Copyright © 2017 Finmint. Designed by OddThemes | Distributed By Gooyaabi Templates