Money is probably the scarcest but most vital resource every small business founder has. Without capital, you can’t make your great idea a reality, and it can take over a year before you start collecting an income from your business. Because education and loan options have expanded, startups are even more popular than before. Someone can start a business from their bedroom with minimal overhead or expenses! But if you want to get serious about turning your startup into a profitable brand, here are a few beginner mistakes to watch out for.
Handling Everything on Your Own
Bookkeeping is difficult, especially if you do not consider yourself money smart. While you can build financial literacy on your own, it is often best to let a professional accountant help you manage your business’ finances. You may not be able to hire a full-time chief financial officer (CFO), but you can outsource work to accountants for hire and get help with things like invoices, taxes, and expense reports. If you want to learn more about budgeting yourself, you can consider expanding your education. A business degree, especially an MBA, can give you the foundation necessary to perform a wide range of tasks that other entrepreneurs have to hire other people to perform for them.
Acquiring the funds to get an MBA might feel like a roadblock, but there are options. You might consider borrowing a student loan from a private lender to cover the cost of tuition and other expenses. Private loans are an excellent form of capital for graduate students because you receive a low interest rate and can easily take advantage of refinancing and consolidation in the future.
Not Keeping Statements
With so much digital currently, many entrepreneurs think they can fully automate bookkeeping. While there is plenty of software available that can make the process easier, you should still save every receipt and have physical documentation of your income and expenses. Print out your monthly bank statement, and make sure you have a separate account for your business. One of the worst things you can do is have all the costs and profits from your company being mixed into your personal finances.
Hiring Unqualified People
When you do not have a huge budget for workers, your hiring pool dwindles. Many startups are so eager to build a team that they don’t put enough thought into the people they’re bringing on board. You have to think about the big picture. Is this person able to provide a long-term value to your company and assimilate to its potential growth? Is their skill set aligned with your consumers’ needs and your own requirements? Avoid hiring just for the sake of having another pair of hands. Be meticulous, and make sure the people you incorporate into your company are committed to your vision and capable of performing their roles well.
Not Planning for Disaster
Let us say your profit is up for a few months only to tank unexpectedly. Do you have the resources in place to keep operations working as usual despite the reduced income? Cash burn, which is the amount of capital a startup spends each month on regular expenses, can quickly cripple you without forethought. Take time to consider some “what-if” scenarios; they’re more common than you think, and it’s always good to know what cards are in your hand in the event of a sudden downfall or major loss.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.