Creating wealth and building successful businesses require financial discipline. Successful entrepreneurs know this and they do everything in their power to manage their businesses with keen eye on how they spend funds new ideas, projects and existing businesses.
By all means you should avoid these money mistakes. Theses are a few of the many money mistakes successful entrepreneurs don’t make.
1. Managing financials when it’s a struggle.
Unless you’re a financial whiz, it’s not easy to work out your financial plan and pin down precise numbers; sometimes important financial details can fall by the wayside. And you can’t seek the services of a professional right from the beginning. Sometimes you just don’t have the resources for that yet.
But ugly truth it that most businesses are bootstrapped. Lots of entrepreneurs can’t engage the services of a professional accountant hence they need to manage finances themselves to a point where they can comfortably hire a professional to take control of that.
But if have some kind of revenue coming in for your business, have closed a seed round of funding, have a lot of expenses, and/or are earning real revenue, you need a CFO to help manage finances on a strategic level. Don’t compromise on that. The details are as important as the big picture.
2. Burning cash too quickly.
Your burn rate is the amount of capital you go through every month to keep your business running. If you don’t have a good understanding of this metric, you will hinder your ability to achieve milestones before money runs out.
It’s easy to miscalculate operational costs, so initial financial forecasts are often wrong. Keeping track of all of startup expenses will minimize these miscalculations. You should be good at keeping money—not spending it. Build a great plan for every stage of your entrepreneurial journey.
Successful entrepreneurs know when and how to spend the little they have. Even though you may be making money, you still need to keep spending as low as possible. The more reserves you have, the longer you can stay in business to make even more. Focus on the return on investment for every amount you spend.
3. Expanding too fast without the resources to sustain it.
Growth is definitely a good thing. But it can get in the way of running your business. You can easily miss the tiny details of a business that’s growing too fast for it’s own good. Those details you ignore can cripple you business.
If you have reached a point where growth is a must, get professionals to handle processes like accounting to keep your numbers in good shape. You may just think of an accountant when it’s time to file your taxes but he or she holds the secret to how healthy your company is and what to do about it.
4. Saving more without thinking about earning more.
Even though you may be saving more as a business, your ultimate goal should be earning more. Most successful entrepreneurs don’t make money right from the beginning of their entrepreneurial journey. But they know what to do to make money at some point of their businesses. Your repeat customers may be keeping you in business but you should also focus on attracting new customers on daily basis.
5. Failing to budget for even a small business.
It is nearly impossible to launch a successful startup without a well-researched budget. And even more difficult to survive without planning out the business’s financial future. No budget generally indicates no planning, and tends to result in throwing good money after bad, especially during lean times in the venture.
Setting a budget allows a business to maintain focus on a well-developed strategy while ensuring the cash flow is sufficient to keep the business alive and growing. It is a common but inadvisable error for first-time entrepreneurs to underestimate the importance of solid financial management. Get your numbers right. It’s the oxygen that keeps your business running.
6. Hiring before you can afford it.
In as much as hiring can can reduce your workload, don’t do it until you are totally convinced that your business can afford a new hire. If you are not hundred percent ready to bring on someone new to take up a task, don’t do it. You will be taking on a big expense with very little return if you hire at the wrong time.
Having too many employees is a huge drain on funds. Instead, hire slowly. When in doubt, don’t hire. Get in the best and smartest who knows how to handle their responsibilities without supervision.
Money issues literally make or break entrepreneurs. So you have to take every opportunity to be smart with the money you spend.