Cash flow is the vital life force for any new business or start up. Industry specialists and financial advisors say that too many new businesses nowadays run out of money before they’ve even gotten started. Most of the time, these are simple, rooky mistakes that could have been prevented if the business owner were more prescient about the financial fragility of their new company. These missteps run the gamut, from being too overly ambitious, having too expensive of taste and not forgoing certain expenses in order to hold on to capital for a rainy day or a fiscal cliff. Well, that rainy day or fiscal cliff can come sooner than many small business owners think if they are not careful. Here are 5 money mistakes to avoid when starting a new business.
Buying expensive office furniture. Many new business owners feel the need to get the shiniest, newest and most expensive office equipment. Tables, chairs, computers and more, bought new, can cost a fortune if you are trying to fill a whole office space. Just because you are a brand new business doesn’t mean you need the top of the line office accessories. You are fresh, young business and clients will understand, or perhaps even respect, that you care more about the bottom line opposed to designer office furniture. The best thing you can do is to buy used, at auction, or at liquidation sales. You can also check out different office furniture suppliers to find the best deals.
Not anticipating every business expense. New business owners also tend to make the mistake of always coming up short. When you are doing your expenses always add enough padding to account for the unexpected. Many business advisors, like Selby Associates, will tell business owners that when they are doing their numbers that should always double down. Whether you are looking for a loan or discussing with investors, always include padding, because, no matter what, in the long run you’ll need it.
Paying too much to your employees. Many new businesses also make the enormous mistake of over hiring or over paying new employees. Yet, at the end of the day, you can start to see your own pay diminish as your new employees demand bigger and better salaries. In the beginning you can always look for interns and offer them company stocks, or you can take on an extra position or two until your business is out of the red. You should also pay close attention to labor times – to ensure that you are not paying out more to your staff than you are earning on each job. Labor times for auto repair, for example, should be examined closely in order to ensure your business is profitable if you provide automobile repair services.
Overdoing it. It’s also important for new business owners to stick to the basics and remain pragmatic about their company’s needs. All a business owner needs is a nice suit and clean, professional demeanor. In the beginning, you might not need the big office space and the multiple expense accounts. Remain humble and true and it is sure to pay off down the line – perhaps even in the near future. Sometimes business acquisition loans are needed in order to get started, but don’t overdo it – just stick to what’s necessary in order to get your business running smoothly.
Not anticipating a ditch. Lastly, every smart new business owner will need a contingency plan. If your business hits a fiscal snag, it important to have the readiness and the wherewithal to get your company back on dry water. Just like any ship captain knows how to steer their ship out of stormy waters, a good CEO knows how to dig their business out of a ditch.
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