You recently made your dream of owning a business a reality. Rather than wait for hard financial times to arrive, you want to get ahead of them. Companies in all industries make similar financial mistakes. Do yourself (and your business) a favor and learn what those pitfalls are and how to avoid them.
Failing to Stick to a Budget
Much like your personal life, TravelBank notes that it's good to not only create a budget for your business but to stick to it, too. With a well-laid-out budget, you reduce the chances of incurring unplanned expenses. Of course, your business budget may change over the years according to your current needs. Planning for as many expenses as possible protects your cash flow and mental health.
Not Dividing Business and Personal Finances
Financial professionals recommend applying for an employer identification number to keep your business finances separate from personal finances. With an EIN, you can file payroll tax returns and business incomes taxes. One vital reason to draw a line between personal and business money is to limit your personal liability. You don't want to risk losing personal assets, such as your home or car, to build your company. Keep in mind that filing an Arizona LLC registration for your company will also protect you in this way.
Trying to Do Everything Yourself
There are likely aspects of operating a company that you cannot tackle alone. Consider working with a business consultant to better your chances of turning a profit and sidestepping unnecessary mistakes. Use online job platforms to search for reputable consultants, and consider their reviews, delivery times, and costs to narrow your choices.
You may also want to enlist help from marketing strategists, accountants, security experts, and human resource managers. You and your company could also benefit from having a business mentor to guide you.
Poor Cash Flow
To keep your business out of the red, Fast Capital 360 recommends overestimating business expenses and underestimate how quickly your operation turns a profit. Also, learn the difference between making sales and having a flow of cash. Even if a business makes a lot of sales, until the owner has money in hand from those sales, the company's coffers may sit empty. When customers pay late (or if they miss payments entirely), that may mean you pay your bills late. You don't want to spend your time playing catch up on all your bills and their associated fees.
Paying Too Much on Startup Costs
Be careful about ordering inventory when you first open your business. Overestimating how much business you'll bring in could mean you order more inventory than you can sell. You may also hire more employees than you need, which means paying people to sit around twiddling their thumbs while waiting for business.
To keep from spending too much, talk to other entrepreneurs in your industry. Ask how they got started, how long it took for them to earn a profit, obstacles they faced, and lessons they wished they'd learned earlier.
Neglecting to Pay Attention to Loan Interest Rates
While taking on debt may be part of business, incurring high-interest rates doesn't need to be. Before agreeing to debt, get the facts on what you'll pay in fees, charges, and interest.
Learn from others' mistakes – such as not sticking to a budget, not separating personal and business assets, trying to be a lone wolf, failing to prioritize cash flow, and overpaying on startup costs – while supporting your business. Thorough and careful research could keep your business dream alive.
Join the Southwest Veterans Chamber of Commerce to join a military community that will help you grow your business.
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