Launching a business is one huge learning curve. Even if you have done it before, each time you go through the process, you have new challenges to face. You might have to learn about a new industry, take employees on for the first time, or get to know a new target market.
One of the primary elements you need to focus on with any new business is organizing your finances. Money is everything if you want to be successful, and making one too many mistakes could mean the difference between success and failure. Make sure you don’t make any of these financial startup errors when you launch your business.
1. Mixing personal and business finances. One of the mistakes that a lot of first-time business owners fall for is mixing their personal and business finances. Even if you’re the only person in your business and any profits are going into your paycheck, you need to separate the two. If you don’t, it can only cause trouble later on.
For one thing, you may have trouble doing your taxes when you need to separate out your personal and business money from one set of bank statements. And if you later want to separate them properly, it could be a nightmare. Make sure you have a separate business bank account and set of accounts.
2. Buying things you don’t need. When you set up a business, it’s natural to look at all the latest innovations and gadgets that other people are using. If someone who’s a big player in your industry owns a certain piece of equipment or furnishes their office in a particular way, emulating them could help you, right?
But while these fancy add-ons might be useful to give you an edge further down the line, you don’t need them to get started. At the beginning, you should be very careful how you spend your money. Choose to purchase only the necessities, not things that make nice extras.
3. Not hiring an Accountant.
When you first go into business, handling your accounts can seem relatively straightforward. For example, if you’re working as a sole trader, you may have a simple stream of incomings and outgoings. But while you might be able to handle your bookkeeping for a while, you’ll find you need help later on.
Using accounting services such as Wallace APC will help you avoid costly mistakes, save you time and money, and put your mind at ease. You’ll also find them more useful later on when you have to handle payroll and other tasks. But be sure to find an accountant that’s right for your business, instead of just finding the cheapest one.
4. Ensuring you have enough to live on. Finances can be tough when you launch a business. In the beginning, you might not be making enough money to pay yourself. Remember you need to take care of your other expenses before you can give yourself a paycheck.
If you’re going to give up your day job to launch a business, it’s vital that you have some funds to fall back on. Ideally, it’s a good idea to have enough to cover between three and six months’ of your expenses until you start bringing in a proper wage.
5. Renting an office too soon. Before you go looking for office space for your new venture, think about whether you need it. Many new business owners start off working from home, even if they’re working in partnership with other people. If you’re working with others or intend to have employees, is there another way you can work together? You might be able to work remotely, or even set up in a coworking space somewhere. Don’t rush into renting an office until it’s necessary for the functioning of your business.
6. Missing hidden costs. You need to think very carefully about all the expenses your business will incur. Most people are aware of the obvious ones, but there could be hidden costs that you fail to notice. Make sure you have a good idea of the real expense of all your business operations, and that you don’t get stung by anything you weren’t aware of.
7. Building piles of debt. It’s very dangerous to bury yourself under mountains of debt right from the beginning. If you need to put yourself into tonnes of debt to get your business started, you might need to think again. It’s much better to try and build up your cash flow to grow the business than to start borrowing right away.
Avoid making these financial mistakes and you can help your business get off on the right foot. Learn from the things that other new businesses did right and got wrong, and you’ll increase your chance of success.