There are plenty of financial mistakes that can sink your business. The most obvious are failing to budget, neglecting a savings account, and using credit cards to cover your expenses—but that’s not all. There are mistakes that might not even cross your mind as mistakes or might not even cross your mind at all. Here are five financial no-no’s you should consider when putting money toward your developing company.
- Overspending Too Early
If you’ve got the money to spend on your venture, it might be tempting to dump all of it on the coolest office space in town and every state-of-the-art gadget you can get. You might want to hire all the best people and buy all the inventory you could need. In theory, that’s something you could do, but it might become your downfall later on.
Spending an extravagant amount of money on your business before you’ve established a regular stream of customers is a hard move to justify. You may never see even a quarter of return on your investments. We’re not saying don’t put any money into your startup. Obviously, you have no other choice. But be frugal. Stick to equipment and inventory you couldn’t exist without. Pick a property where you won’t have any wasted space.
- Acting Too Quickly
In a similar vein to being risky with your capital as you’re starting up, you can really dig yourself into a hole if you chase all the dreams you have for your business when you just got the keys to its location yesterday. It’s understandable that you want to fully realize your vision, but you might be setting yourself up for failure if you convince yourself every idea you have is gold.
Before you release any product or service onto the public, research what you’re getting yourself into. Ask yourself some questions and do your homework. Who are your competitors? Do people in this area of town want or need what you’re selling? Yes, this one product is doing well, but will the next one you plan to offer generate the same enthusiasm? You want to expand your offerings, but can you afford a team sizable enough to meet your deliverables? Try not to get carried away.
- Skipping on a Financial Translator
You’re probably an incredibly creative person. You’re an entrepreneur. Selling inventive ideas to a reluctant consumer base is your lifeblood. Your creativity probably has you imagining you can understand any topic you’re presented with—and your persevering streak has you believing you can operate a business and master corporate accounting at the same time. We get it. We’re not here to discount your many admirable qualities. Your determination, drive, forward-thinking nature is a sight to behold.
However, being creative truly doesn’t always translate to financial literacy. You can’t know what you don’t know. Fortunately, there are people who have studied financial jargon for years. These knowledgeable people can demystify your contracts and financial obligations, protecting you from costly financial blunders.
- Mixing Business and Personal
You might think all the money for your business can come out of your personal bank account. Afterall, your business feels personal to you. It’s your brainchild. It’s probably the top thing on your mind.
However, your financial situation can get pretty twisted pretty fast if you don’t set some boundaries between your personal finances and your business finances. Though your business may feel personal, it’s really not. Something as massive as a corporate entity should have its own bank account.
By separating personal and business money into their own places, you’re being smarter with your finances. You’re making sure you’re organized and drawing distinctions between money that goes into your business and money that goes into daily life.
- Being Reckless with Marketing Money
We all know marketing is important for businesses trying to churn a profit. You might be passionate about what you’re selling, but at the end of the day, you can’t do it for free. That’s just not realistic. You have no choice but to attract customers and retain them, so you can get returns on your investments. That means marketing costs absolutely have to be part of your budget.
How you go about marketing is your own choice. You can take a class on social media marketing, learn about SEO, run a Facebook ad campaign, set up a booth at your local fair. You’ve got options.
Of course, it’s important to know which marketing strategies you can afford, and which avenues of marketing have the most potential to reach your target market—and it’s also critical to constantly keep an eye on whether those marketing strategies you chose are increasing revenue.
For example, you don’t want to be spending hundreds on Facebook marketing only to realize the consumers who are most likely to buy your products or use your services aren’t even on Facebook. Don’t tank your company’s finances through poorly planned marketing schemes.
Luke Miles | Staff Writer