5 Financial Follies to Avoid When You Start Your Business
Starting a business is rarely easy, especially when it comes to making financial decisions. However, the choices you make when you start your business can have long-term effects on the company’s financial well-being for years to come. A staggering 29% of unsuccessful startups ultimately failed because they just ran out of cash. Avoiding common mistakes at the outset can set you up for success.
- Overestimating Revenues
When you start your business, you are likely naturally optimistic. While your passion and drive are great for developing your company, having a realistic outlook on your financials will help you have long-term success. It is okay to have high expectations, but it is important to keep revenue numbers realistic.
- Underestimating Costs
Having a realistic grasp on your costs is just as important as having a realistic revenue goal. Many startups will spend more than they initially plan, and it is easy to get excited and start spending money in large quantities. Starting small and keeping emotions in check will help you avoid unnecessary costs.
- Not Having a Budget at All
It is better to have a bad budget than no budget at all. It is difficult to estimate what your revenues and expenses may be when you first start a business. However, having a starting point is imperative. You can adjust your budget once you get real numbers in the upcoming months. Get something on paper or in an electronic accounting system so you can establish a starting point. Sticking to your budget is important as well. Remain disciplined when it comes to incurring costs.
- Allowing Others to Handle Your Finances Completely
It may be tempting to completely hand off your financial obligations to an advisor, an attorney, or a CPA. After all, these experts often know far more about finances than you do. However, these people do not understand the goals that you are trying to accomplish within your business. Only you understand that. You need to keep a finger on the financial heartbeat of your company so you can spot problems and increase efficiency as needed.
- Not Setting Quantifiable Goals
Goal setting is often one of the most challenging aspects of running a business for many entrepreneurs. It is especially challenging when you first start because you may not really understand the supply and demand for your business. However, as you become more experienced, you can develop real goals based on actual numbers. Having quantifiable goals in place motivates you both emotionally and financially.
Use this quick guide as a way to set up your business for success for years to come. If your company is struggling, the team at Maxwell Dunn can help you get back on the right track. Contact our office today to set up an appointment.