Avoid These 5 Common Financial Mistakes That New Businesses Make
- April 10, 2017
- Posted by: Quarles Business and Financial Strategists
- Category: Financial Advice
Avoid these 5 common financial mistakes that new businesses make.
There is a lot of things to think about when starting a business. You have the idea but now you need to make it a reality. You have a thousand and one things you need to do to ensure your business is a success, and in doing so there are some mistakes a lot of new business make while they are getting things off the ground. Read on to find out what they are and how best to avoid making these mistakes in your own business.
- Having dreams instead of goals
It’s not uncommon to hear new business owners give very general ideas as to what they think their business goals are. “Once we are making a profit we will look at hiring staff.” “I’d like to earn enough from the business that I have some savings.” “In a couple of years depending on how secure we are I’d like to look at expanding.” These are not goals, these are dreams.
Goals are well defined, specific, with a timeline and based on reasonable rationale. For example: “Based on our profit margin from the last 2 financial years, in 12 months we will invest in a second store.” By being specific with a timeline it gives you a measurable goal that you can track and work towards. Also by basing your goals on reasonable assumptions it means you are making educated achievable goals not just pipe dreams might not realistically be able to achieve.
- Making thoughtless purchases
“You’ve got to spend money to make money”.
That’s the saying that we have all heard time and time again. We know when we set up a business it is going to be a costly venture initially, but once you invest all that time and money it will be worth it when your business is successful. After all, it does cost a lot to get a business idea off the ground.
There is a big difference however between necessary start-up costs and purchases that you think will improve your business but are not immediately necessary. For example, the cost of renting and kitting out a new café are all expected start-up costs, but purchasing a tablet for waitresses to take orders and process payments on is something that can improve your business but is not going to make or break your business in the first few weeks. No matter what stage your business is at it is important to always scrutinise all purchases to make sure they are necessary investments.
- Waiting until problems happen to fix them
When things are going good it’s easy to get caught up with the daily goings on of your business and not think about taking time to review your businesses position. We are making money, we have customers, so why bother with that when I have all these other things to be doing?
Reviewing your businesses position should not be left until a time when things aren’t going well. Instead by reviewing things on an annual basis it gives you a chance to see where improvements can be made, problems that can be avoided and new goals that can be worked towards.
- Thinking the sun will always be shining.
When starting a business, you know that it may take potentially a couple of years before you see any kind of real profit. Then once you do start making a profit from your business it is very tempting to invest the money directly back into the business with the intention to save once you are earning more.
But most businesses, especially in the early years, operate on a very small profit margin. Whether it be Mother Nature or changes in the market, it only takes one unforeseen event to do substantial damage to your financial position. You need to prepare for things that you don’t expect and ensure that you have enough savings to cover at least 2 months of expenses. This will give you a safety net to be able to deal with the unexpected and get back on top of things.
- Everyone needs help
There is a big difference between being involved in every aspect of your business and not admitting that you need help with certain parts of the business. Some people don’t like to pay money when they feel they can manage it themselves. It could be not wanting to hire an accountant in Perth for your bookkeeping, not investing in a marketing specialist as you think know what the market wants or even not hiring a manager to oversee daily operations when you can just do that yourself.
You can’t do everything and you can’t be an expert in every field that your business needs. It is important to step back and admit that sometimes you may need the help of a professional. By admitting this you will be able to get the help you need to maximise your business and thus in turn your financial position. Give Quarles Business Advisors & Accountants Perth a call today and find out how we can help improve your finances.