That you will make mistakes, and learn boatloads from them as your business goes along is inevitable; experience is our greatest teacher is it not? But, just because you can’t know everything, and do everything perfect right from the start, doesn’t mean you can’t arm yourself with the knowledge to minimize errors, and maximize success from the start. The realm of finances can be particularly tricky, and here are a few of the most common mistakes for which to watch as start up your business.
Not Understanding Your Market Well Enough
Without a solid understanding of your market, all those precious dollars that should be used as wisely as possible in the beginning will be spent ineffectively on sales efforts. While you clearly have an idea of your most ideal customer, and who is most likely to buy your products and services, an in-depth analysis is well worth the effort. The more closely you target your marketing, the better ROI you will see.
Another market-related issue of which to be aware is properly pricing your products and services—you want to be sure you are charging what they are worth, but not too much. Examine what your competition is charging, the financial picture of your target audience, trends and any other factors that impact pricing.
Stifling Cash Flow
While your start up funding is naturally the bulk of your cash reserve in the beginning, don’t get lazy with getting your cash flow situation right. You don’t want to form any bad habits that will cause big problems down the line when your seed money is no longer the primary fuel driving the growth of your operation. Poor cash flow is the scourge of many a business, new and old, and can be the kiss of death, even if sales are relatively good.
Screen customers carefully if you operate by extending credit for purchases; stay on top of receivables, and go after late payments right away; establish a process for dealing with past due receivables that is executed each and every time an invoice is late. Keep track of expenses so you know where your money is going, and trim what is unnecessary. If you carry inventory, carefully track it so you are not ordering things unnecessarily; try to work out a payment schedule with vendors that allows time to get payments from customers. Don’t pay bills until they are due, unless you get a discount that really helps your bottom line. Think carefully before you spend—unless you really need something right now, hold off.
Not Getting Professional Assistance for Financial Matters
If you are highly knowledgeable about payroll taxes for employees, bookkeeping, etc…by all means, handle your finances on your own. But, if you are like many business owners, you don’t know quite enough to do it on your own successfully—you may think you have a handle on it, but you probably don’t’. Don’t let ego, or the desire to save a few bucks, keep you from getting sound financial advice and help from professionals.
