If you were to survey new business owners, or even established business owners, and ask them about the mistakes that they made when they were first starting out, many of them would likely report the same things.
In fact, we’ve compiled many of the mistakes that nearly all new business owners make right here, so you can learn from their mistakes and avoid them yourself.
Of course, you can’t avoid all money mistakes as a new business owner. What you can do, is look at them as lessons and learn from them, making sure you change tactics when necessary by staying as flexible as possible
Take a look at the 14 money mistakes below and you’ll have a good idea of what you need to avoid as a new business owner.
Mistake 1: Waiting Too Long To Get Financing
Applying for and actually receiving finances for your business can be time-consuming. Waiting too long to attempt it can be a huge mistake and mean you run into issues. Waiting too long could mean having to accept an option that is less than ideal for you, so make sure you stay on top of your cash flow and make sure you create ongoing financial forecasts. This way, you’ll be able to see any issues you might run into well in advance and then take the steps to secure capital as early on as possible. By Applying for financing while your business finances are still in good shape, you will boost your chances of approval. Don’t wait too long!
Mistake 2: Not Working With Financial Experts
Working with a financial expert or two can help you to ensure your finances are in order and give you peace of mind. A recent study found that incompetence caused 46% of business failure .This means that if you need help managing finances, taxes, pricing, and planning, you should get it ASAP or it could mean the end of your business. Consider the value of hiring an expert to manage the company’s cash flow properly, as well as things like taxes. This isn’t something you’ll regret.
Mistake 3: Living The High Life Early On
Loan debt is just getting bigger, especially when you study millennial Americans. If you’re run down with debt you won’t be able to invest in and improve your business. Living the high life too early on will mean you can’t afford to put cash where it really needs to go. Don’t buy equipment you don’t need, and especially don’t buy personal items like sports cars in the beginning. It should take years before you’re comfortable enough with the success of your business to invest in this kind of thing.
Mistake 4: Not Delivering Real Value To Your Audience
Here’s a scary stat for you: 42% of businesses fail because they aren’t delivering real value. There’s no need for the product or service. You really need to do your research to make sure you’re giving people what they need. It’s never a simple case of build it and they will come.
Mistake 5: Not Having A Business Plan
Outlining your goals and the details surrounding your business will help you to carve out the path to success. If you don’t know how much money you need, and when you need it, you won’t be able to lay out projected sales, costs, expenses, and timing of payments. A business plan can also help you to secure funding from various sources, so it really is an invaluable tool. There are templates online, so you have no excuse not to create one.
Mistake 6: Not Having An Emergency Fund
Another stat: 82% of businesses fail because of cash flow problems. This just confirms what we’ve been trying to say so far – that having your funds in order and managing cash flow is imperative. You should know what your monetary needs are for the next 12, 24, and 36 months. It’s important to know what numbers you have coming in and going out, but you must also take timing into account.
Having an emergency fund set up will help you to keep going during tough times or when you’re awaiting payment, and will stop you from having to use credit.
Mistake 7: Not Raising Enough Money
Did you know that 77% of small businesses rely on personal savings for their initial startup funds? However, 29% of those businesses failed because they ran out of cash. Using money from your own stash is great, but you will likely need to raise even more money to make sure you are protected for the unforeseeable.
Mistake 8: Quitting Your Day Job
While you grow your ideas and work on your hustle, it’s a good idea to stick to your day job. Taking a leap of faith is something you’ll need to do eventually, but immediately quitting your day job could be a huge mistake. In fact, keeping your day job could be a chance for you to aggressively save an emergency fund and put money aside to invest in your business. Almost 15% of small business owners worked a second job while they started out. Before you quit completely, you might even consider asking for cut hours so you have more time to dedicate to your hustle while earning money. Your success story doesn’t have to be this huge rags to riches tale.
Mistake 9: Failure to Be As Lean As Possible
You need to aim to be a lean business when just starting out. Buying fancy equipment and the nicest office might make you feel better, but when you see how this affects your finances you might not be so keen.
Mistake 10: Forgetting To Do Market Research
Your friends and family might be non-stop encouraging you, telling you what a fantastic idea this is, but that just isn’t enough research to start a business. Without a well defined target market, you’re not going to be able to compete. You must do market research and pinpoint your ideal target market, making this as narrow as possible so you can be successful. You can do this by using secondary sources, like Census data, and primary sources, such as surveying prospective customers and holding focus groups. All new business owners need to take this seriously, or could end up wasting a ton of money on a business there is no market for, and marketing techniques that are too broad.
Mistake 11: Choosing The Wrong Type Of Business
Making sure your business is set up correctly is a must – many people end up making their business a C corporation because they think that this is the standard way to do it, but unfortunately, this can lead to legal risks and make it very hard to raise capital.
Before you launch your business, you must talk through plans and goals with both an attorney and an accountant so you can assess your situation and future plans and choose a structure that is right for you.
Mistake 12: Treating Employees Like They’re Temporary
Your employees are extremely valuable, and you want to make sure they are engaged and happy to improve retention. This will mean less sick days, less turnover, and of course, less costs to you. Make sure you look into services like DataServ.com that help you ‘hire to retire’ and ensure that people don’t get lost in your systems. When you hire, you should be hiring for life and aiming to keep your employees on board for as long as possible.
Mistake 13: Waiting Too Long To Hire
There are a few reasons new business owners wait too long to hire. One is trying to save money, another is being apprehensive about delegating important tasks. However, waiting until your company is desperate will likely mean you end up hiring somebody who is not right for your business, and this will hurt you in the long run. 23% of businesses failed because they hired the wrong type of people for their business. Trying to save money by not hiring will no doubt mean you lose money if you do need an extra pair of hands. Getting used to delegating at the start is good practice, too.
Mistake 14: Failure To See the Issues In Your Leadership Style
Many businesses these days lack strategic, effective leadership. Many newcomers don’t have the experience in the business world and become overwhelmed with all of the demands they have placed on them. Then, problems arise and they just don’t know how to navigate them. Being able to see the issues with your leadership style is essential, so get used to being self aware and figuring out why it is you do the things you do.
Everybody has a different leadership style and strengths/weaknesses; what are yours? If you’re unsure, now could be the perfect time to hire a mentor.
It’s all too easy to blame problems in your business on staff, vendors, and other things, but the truth is, problems often do arise from bad leadership. Be honest with yourself.