Embarking on the adventure of opening a business can be exciting. You’ve taken a leap of faith and are ready to make your startup business dreams a reality. In order to run a successful and financially responsible business, you’ll need to ensure that you adopt wise financial habits from the start.
The beginning stages of running a business can be uncertain; as 96% of businesses fail within the first 10 years. In this post, we’ll detail six financial mistakes that startup business owners like you should actively avoid to help guarantee your business’s future.
It’s understandable that you want to make your startup as successful as possible. But if you overspend, you’ll pay for it in the future. According to a U.S. Bank study, 82% of businesses close due to cash flow management issues. Therefore, you shouldn’t wrack up debt or overspend on inventory, services or other costs.
By overspending now, you won’t be able to invest in other areas of your business later. To combat this, make sure that you stick to your monthly budget. If you get into the habit of adhering to a budget, you’ll be less likely to overspend!
2. Not Keeping an Accurate Ledger
You should be precise when doing the bookkeeping for your new business. Being careless with your bookkeeping could lead you to make major financial blunders, and may cost your business its future.
If bookkeeping isn’t your strong suit, consider hiring an accountant to handle this for you. You’ll be relieved to know that your business’s finances are being taken care of by a knowledgeable professional.
3. Not Comparing Prices
As a startup business owner, it is pivotal that you take time to compare prices when it comes to services, inventory, providers, and other mandatory expenses. While it may be tempting to save time and pay the first price that you come across, you will likely end up wasting money.
Instead, don’t be afraid to shop around until you find the best deal. You’ll feel better knowing that you found a package that suits your business’s needs and isn’t as expensive as others. Plus, with the money you saved, you can put it towards other necessary costs.
4. Purchasing Too Much Inventory
While we admire the confidence you have in the future of your business, don’t go overboard when purchasing inventory. If items don’t sell the way you expect, you may wind up losing money that could be used on other aspects of your business. It is better to be frugal now and fill bigger orders once you see the flow of your business sales.
If you do make the mistake of purchasing excess inventory, don’t just give up. There are numerous ways that you can attempt to sell these items. Whether it’s holding a sale or listing items on your business’s website, you should try to sell items if possible. That way, your business won’t lose too much money on these unsold items.
5. Paying for Services that Your Business isn’t Benefiting From
Starting a business can have a lot of trial and error experiences. One of these mistakes could be onboarding a service or provider that your business won’t ultimately benefit from. Don’t be afraid to cancel these services if your money can be better spent elsewhere!
If you’re consistently evaluating how certain services are benefiting your business, you’ll be sure to eliminate ones that aren’t working out.
6. Not Setting Financial Goals
As a startup business owner, you likely have a vision of what you hope your business will look like in the future. In order to bring these ambitions to fruition, you should set clear, achievable financial goals. This could be a certain sales amount you want to reach, a saving goal, or other financial milestones.
Make sure that you keep track of these goals, and review them often. Record the progress that you’re making, so you can determine new ways to reach your goals. By holding yourself to these targets, you’ll be able to continually improve your new business’s finances.
Avoid Financial Mistakes
Now that you know about these six financial mistakes to avoid, you can start implementing wise financial habits. Setting financial goals and sticking to them will enable you to grow your business. It’s pivotal that you make your finances a top priority, starting with the moment that you open your business.
Do you know other financial faults to stay away from? Let us know in the comment section below.
About the Author
Katie Alteri is a content marketing coordinator for Fora Financial, which provides working capital solutions to small businesses in need of financing to sustain or grow their enterprises.