Most common financial mistakes start-up business owners
Money is a king who is not kind for those who make mistakes. Businesspersons can easily relate to this, as money is the backbone as well as soul of their commercial growth. Special concern is to start-up business owners who cannot afford to do mistakes. For them there are very rare or no second chances.
If you know beforehand what exactly are the mistakes that you may do on financial side, you can prevent nightmares.
Lack of good planning
Planning can be a boring task but it is unavoidable. Without a strong plan, it is easy to lose your path and get lost in the haphazardness of countless tasks. There are some important aspects of planning that help you construct a ground for the business to spread and grow. Business research, financial planning, marketing plan, all act important.
Following are the adverse effects of lack of planning -
- Goals and targets do not get clear; this leads the efforts in the wrong direction.
- Waste of efforts and financial investment cause loss.
- Productivity of business degrades which stimulates further loss.
Undervaluing products and services
Due to lack of confidence or in the efforts to stand in front of the industry giants, you undervalue your products. This leads to a long-term loss, because as a businessperson you have to think about your own profit. Commercial activities are very rational and can never give due results until you do not stay logical.
Some of the very prominent losses of this are –
- Recovering from undervaluing goods is very difficult on financial side.
- Possibility of frustration increases which leads to more mess.
- You miss to prove your worth in front of the customers.
- The imbalance of cost and income happen causing loss to the productivity and profit.
Not having separate personal and business accounts
Start-up business may start from your home but its finances should not be mixed with your personal finances. Many start-up owners do this, they take things for granted and do not understand the importance of categorisation. Are you also doing the same? Oh! Don’t do this to your business.
It can have some very bad effects on your future growth. For instance –
- You miss to notice and see the exact financial picture of your business
- You can fall in a taxation pit as there are strict rules against the personal use of the business funds.
- Bad credit situation may occur. If you keep using business funds for personal use and some crisis happens, the obligations and debts can remain pending. This pushes your business in bad credit situation. In case of missed payments, business credit score may become worst and you have to take support of very bad credit loans with no guarantor by direct lender. These loans are available online on customised rates to facilitate timely repayments. This improves credit score but it takes time and your fragile business may find it hard to wait for such a long time.
Make separate accounts for business and personal use and never mix them. Doing this is nothing more than a financial suicide.
A start-up is a business in its infancy and it cannot bear much load. Many people make big purchases in the very starting, which shakes the finances from roots.
Some of the frightening effects of this situation can be -
- Shortage of funds occurs and it becomes difficult to feed other expenses and daily routine operations.
- Your marketing plans get affected and most of the people remain ignorant about your presence. This finally creates a long-term loss.
- You may not be able to use to the whole material (purchased) due to less demand as compare to the quantity purchased. The left part is a complete wastage and the result is further financial loss and this time it is prone to become huge.
Not saving for tough times
The importance of savings is not only in personal life. Businesses too should know how to save and keep saving in the future. After all, financial nightmares can arise anytime and start-up businesses are more prone to them. Usually they come in the form of unexpected as well as urgent expenses.
If you do not save for rainy days, the outcome is –
- Intense financial crisis
- Degrade in credit rating due to pending obligations
- Adverse effect on commercial growth
- Difficulty in attaining financial goals
- Pressure to change the strategy according to the new and depressing circumstances
Not using new technology
Technology enhances the capacity to work and saves time and resources, which ultimately saves money. Not using it in your daily routine activities can affect your working capacity and the result is – increase in cost.
The effects of avoiding technology can be
- Degraded performance
- Waste of time
- Waste of money
An instance can be - filing, billing, invoices, many things that can be maintained on tools like Google drives, take time due to absence of technology in the daily routine activities. You need human power and resources to perform all these tasks.
You have to stay on your toes 24x7 until the business gets a good hold on the ground. It is not easy to survive with many challenges. Why to increase the chaos with some silly flaws? The points above can be your guide to know what is right and what is wrong. Stay focussed and avoid mistakes.