August 1, 2011
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I get it. You have a lot on your plate. There is no doubt about that. There are things coming at you from all angles, and you have to be ready to take it all on, or at least know who to hire to stand out in front. Money issues are absolutely the biggest pitfall that entrepreneurs face. If you don’t keep it flowing, or can’t keep enough of it, your business will suffer.
They say, knowledge is power. Here are eight of the most common money mistakes that entrepreneurs make—and now that you know them, you have the power to avoid them:
1. Overhead investments
Many entrepreneurs invest in things like renting an office and expensive equipment a lot sooner than they should. These are usually expensive areas and can wreak havoc on your business. Don’t invest in these things until you really need to.
2. Underestimating miscellaneous expenses
Every business has miscellaneous expenses. Those are the ones that come up that never made it into your business plan and were never imagined. But they will come up, so assume your miscellaneous expenses are going to be a lot bigger than you first thought.
3. Not testing before investing
Eager entrepreneurs will invest loads of money to perfect their product. But they do this before they have even tested it out to see if there is a market for it. So before it is perfect and has all the bells and whistles, do a test run on it and see what the feedback is.
4. Purchasing extravagance
Do you really need that expensive office furniture package? Probably not, even if there are prospects coming to see it. Spending money on things that you don’t need yet is a big waste of money (and showing-off doesn’t seem to pay-off that often either). That doesn’t mean you can’t have that cushy office set-up, it just means it should wait until the business can afford it.
5. Tax avoidance
Entrepreneurs are often apprehensive to speak with an accountant, for whatever reason. Truth be told, you must get with an accountant, as it will save you money in the long run. An accountant can do everything from helping you avoid tax penalties to setting you up a salary or making sure you are on track with making your quarterly tax payments. The accountant is your friend, I promise.
6. Spending on do-it-yourself projects
Sure, as an entrepreneur you want to be able to hire contractors and outsource work. But you may not be in a position yet to do so. There are some simple tasks that you should do yourself, rather than hire an outside source to do for you. This will save money until you really can afford to outsource the task.
7. Hiring before being ready
Many entrepreneurs long for the day when they can hire their first employee. While this may be a great feeling, it should be avoided until the time comes that you actually need to hire someone. If you are not ready to bring on someone to do work, then you will be taking on a big expense with little return.
8. Not spreading the word
While it may not be money you take out of your pocket, it could amount to money you keep from entering it. You need to be your biggest PR agent, spreading the passion and information about your business whenever possible. Throughout networking, talking to others, etc., you need to always focus on getting the word out about your product or service.
Here’s the deal—money issues make or break entrepreneurs. So you have to take every opportunity to be smart with the money you spend.
Check your balance, review recent transactions and pay your bill on the go.
Thursday Bram 9 months ago
When I was working on my first business, I severely underestimated what my misc. expenses were going to be. Since then, I've basically gotten to the point that I add a zero on to estimates that most people give me for odds and ends expenses, because it'll almost always be closer to the truth.