In many ways, starting a business is the easy part. Keeping it financially afloat is the true challenge. The good news is there are fairly easy fixes for some of the more common financial missteps. Here are five common stumbles and the best way to circumvent them:
1. Having a Lack of focus
It’s so easy to allow yourself to move in different directions when you start your business and you’re hungry for work. Under30CEO co-founder Matt Wilson told American Express that he and his co-founder, Jared O’Toole, were “always chasing the next thing that was going to make us rich and pay our bills.” Some of the stumbles included selling personal development books and e-courses, affiliate marketing and daily deals. Wilson learned the best way to grow a solid business is to “start it for life.” That means start with cash reserves and stick with the plan. Remember, it will likely take several fiscal quarters to realize a steady income from your business, cautioned Business News Daily.
2. Partnering with the wrong investor
When your business starts to grow you may find your cash reserves dwindling just as you hope to raise outside capital to keep the profits flowing. But don’t act in haste. Businessman Tim Berry, writing for Entrepreneur magazine, cautions business owners should choose investors as carefully as they choose spouses – they are partners and you want to be sure you’re in sync with them. “Yes, the right investors can pitch in, contribute and give you ideas and advice,” he says. “But the wrong ones can pressure, object, obstruct and make your business life miserable. Even if they don’t have a majority vote on the company’s board of directors, investors are still part owners and have legal rights.”
3. Not analyzing your cash
Checking your bank account is not enough to ensure your business finances stay healthy. It’s imperative that you track financial and business trends so you remain proactive in your business and make prudent decisions, according to National Federation of Independent Business. That doesn’t mean you need to obtain a financial degree to successfully run your business. If you don’t have financial aptitude or time, consider hiring a part-time bookkeeper to track your debits, credits and investments. Another bonus: One of the major financial stumbles for small businesses occurs when accounting errors lead to unnecessary penalties and interest charges,. About 60 percent of accounting errors, they say in quoting research from Indiana University, result from “simple bookkeeping mistakes or misapplication of easily understood accounting standards.”
4. Rolling the dice
No one expects to have their business burn down, get inundated with floods, have a partner die or be sidelined by a catastrophic illness. That’s why many small business owners fail to budget for property and casualty, liability, disability and life insurance, reports DailyWorth. Protect yourself with insurance.
5. Hiring the wrong staff
It’s tempting to hire people you think can grow into a role that takes some work off your plate so you can focus on growth areas. The problem is that making the wrong hire costs you in salary, benefits and time. FoxSmallBusinessCenter recommends outsourcing duties is often a better – and less costly — option.