Starting a business is one of the most important decisions one can take. It can give you many joys and satisfactions as long as you’re careful and don’t make certain business mistakes that could jeopardize what you have built with so much effort and work.
It is preferable to be ready, so you don’t have to regret bad decisions.
Small businesses are at the core of the American economy. According to the SBA, there are 30.7 million small businesses nationwide.
So, if you want to keep your business as an integral part of the economy, you must do everything in your power to avoid mistakes that could hinder your success.
Avoid These 14 Business Mistakes
Unfortunately, only 5 out of 10 new businesses survive the five-year mark. But you can avoid being part of this statistic and stand out from the rest.
Here’s a list of 12 business mistakes you should avoid at all costs. Take these lessons into account and reach the success you’ve always dreamed of.
1. Lack of external financing
It is natural for business owners to think that it is impossible to access capital for their business because most financial institutions have too many requirements to grant loans. This is most frequent amongst business owners that do not have an SSN: they believe that the lack of this number makes it impossible to get a loan. But that’s not true!
There are alternatives, such as Camino Financial, that have great financial products for every need with minimum requirements. You don’t need an SSN to apply, you can do it with your ITIN.
Allow yourself to find the small business credit that best suits your needs and finances.
2. Lack of good accounting
A common practice business owners must avoid is keeping only a mental record of their accounting or, in the best of cases, in a notebook.
You should have strict financial control over what goes in and out of your business, as well as the inventory record. If you don’t, your accounts could have financial errors that could hurt you in the long run.
Remember, the best way to make good business decisions is with a good accounting record. Why? Because you will know if you are ready to make an investment, open a new branch, a new line of business, or anything that can help your business grow.
3. Not having a financial plan
Having a business and not having a financial plan is the equivalent of traveling from California to New York without a map. You can reach your goal, but it will take you longer, you will get lost more than once, and you may have to travel the same roads several times.
Having a financial plan will allow you to:
- know your current economic situation in detail
- create financial goals
- identify needs and alternatives to achieve your goals
- avoid financial mistakes
The most successful businesses are those with order and solid structures.
4. Using company money for personal expenses (and vice versa)
One of the most common business mistakes a business can make is not differentiating company expenses from personal ones.
Mixing finances won’t allow you to have clear numbers and a healthy business. There are business owners who go years without knowing how much they actually earn each month.
This practice of mixing finances is known as “commingling.”
We recommend having separate bank accounts and never use personal money for business needs and vice-versa. No matter how small the amounts are, don’t let informality reign in your business.
Facilitate your transactions by activating your online banking service in both accounts.
5. Not budgeting
All businesses must have a budget; otherwise, they’re doomed to fail or at least end up spending more money than they should.
Making an adequate budget will allow you to know if you:
- are ready to start a project
- have enough money for your project
- need external capital and if you afford it
Establish an emergency fund in your budget. You should 10% of the total value of each project. This way, you will be able to act in the event of a crisis caused by financial errors or external situations.
6. Not saving money
The COVID-19 pandemic has shown us that a company cannot survive long without capital. World, state, or even personal circumstances can change from one moment to the other, but if we keep an emergency fund and save a percentage of our earnings every month, you can be ready for any eventuality.
If you inject capital into your emergency fund for a long time and that money begins to generate returns, you can invest it in improvements for your business.
7. Staying in your comfort zone
The most dangerous thing you can do is stay in your comfort zone. We understand that making changes can be stressful or maybe even scary. But if you never change, you won’t be able to grow your business and increase your profits.
Staying in your comfort zone can have different faces:
- Not accepting a new business deal because you do not want to buy more machinery or hire new employees
- Stopping a negotiation because it involves a great commitment
- Not wanting to change the traditional way of working even if it can be done the fastest process
- Not wanting to adopt technology to your processes
Leaving your comfort zone is the best way to build a strong business that generates more revenue.
8. Not investing in the stock market
Many think of the stock market as a really uncertain way of investing money: they’re afraid they’ll lose their life’s savings in there. But while the stock market can be unpredictable, there are safe, low-risk investments with high yields.
The stock market is an amazing way of investing money and increasing your wealth.
Many other business owners don’t invest in stocks because they don’t understand them, but that should not stop you! You can hire a stockbroker that will make sure your money is safe and invested in the best way possible.
9. Not paying loans on time
Being responsible is an essential part of entrepreneurship.
That is why you must respect the commitments and responsibilities you acquire, particularly if they are made with financial institutions.
If you have a crystal clear financial administration, you can avoid financial errors that could hinder your business.
Paying your bills on time will be one of the greatest satisfactions since it is a great indication that you are doing things well. You’ll also improve your credit history to access larger loans in the future.
10. Not using online marketing to increase sales
Online marketing is crucial to help any business increase its sales.
You should use the internet to your advantage:
- implement social media marketing strategies
- interact with your current buyers
- offer promotions and discounts online
- find potential customers
Show the world that you are an expert in your niche and that you can meet their needs.
There are many online courses that you can find to educate yourself on this topic. If you don’t have the time, agencies and experts can advise you.
Remember, all projects that can increase your sales are a priority, and that includes online marketing.
11. Not having insurance
According to a Next Insurance survey, 44% of small businesses have never had insurance, and 74% of applicants want to use it that same week.
This data shows us that we never really think about emergencies until we have a problem.
Find the option that best suits your budget and that offers you the greatest advantages. Never think that it won’t happen to you.
12. Thinking only of your regulars
Small businesses are so used to their regulars that they don’t think of all the other potential customers they could find.
You might need to find new ways of offering your products to attract different customers, but in the end, it will be worth it: it will increase the number of potential clients and will improve your image.
13. Not worrying about a lack of cash flow
This happens when there is more money coming out of the business than coming in. It can be indicative of many situations, for example, lack of sales or mismanagement.
To solve this situation, you can reach agreements with your suppliers to pay a deferred debt, review and adjust your profit margins, and reduce expenses.
14. Only accept cash payments
One way to improve your cash flow is to diversify your payment options such as bank cards or e-wallet, such as Paypal.
Implementing these practices will attract more clients almost automatically, improve your account management, and pinpoint you as a business that adapts to current needs. Going digital is very important.
Healthy Finances = Thriving Business
This list can help you avoid the most common business mistakes. Most are financial errors that can be corrected immediately.
Change how you work today, and tomorrow you’ll see your business prosper.
It is normal that you feel like you don’t have time to fix these business mistakes because you are so immersed in management. But it is preferable to do so than to have to pay double at a time of crisis.
At Camino Financial, we want to ease your business journey. Our advisors will help you make the best decisions for your company. Remember that a small business loan can help you achieve all of your goals. To learn more about how you can use a loan, we recommend reading:
Tell us in the comments below, what are the biggest business mistakes you’ve made? How did you overcome them?