The American Dream.
Alongside its picket fence and fancy home, business owners alike are ready to live out the extravagant life by ultimately making their start-up business a well-known profit.
Are you one?
Don’t be afraid to admit if you are. Simply join the other 627,000 and counting business owners each year to make your dream a reality.
Before you start making long shots, we highly encourage you NOT to become another statistic.
Let’s view the facts. According to the Bureau Logistics Statistics:
- 20% of new businesses fail during the first two years of being open,
- 45% last during the first five years, and
- 65% during the first 10 years.
- However, only 25% of new businesses make it to 15 years or more.
Do you want to know what causes this significant decline for small businesses?
In fact, it’s the #1 reason small businesses fail. While many other factors play a role in the failure of a company, cash flow ranks the highest at 82 percent.
In this post, we will share with you seven money mistakes start-up businesses make and provide tips on how you can avoid them.
Need help properly setting up your business? Check out our Startup Business Package!
- Believing you have money to blow, but none to save.
When you receive your first check as a business owner, you feel a rush of excitement and joy because you see your work has finally paid off. Nevertheless, since this is your first time receiving a lump sum of money just by doing what you love, it is very easy to feel like you have extra money to spend. The problem is instead of using your funds for what you need or saving them, you may purchase unnecessary items that have nothing to do with your business. To avoid this issue and unwanted headache, start a business budget plan.
Pro- Tip: Create a budget plan for your business by writing out all of your business needs.
- Not prioritizing the funds received.
Another money mistake businesses make is forgetting to prioritize their funds. It is important to create an outline of what your money will be used for before you even receive it. That way, you can prioritize your funds and learn where they will go every time you receive a paycheck.
Pro-Tip: Create a spreadsheet with all of your business sections. In each section, write the number of funds you plan to receive monthly. Every time money is deposited in your business account, record it in its correct section and note that information on your spreadsheet.
- Refusing to gain more knowledge about the business revenue and how it should be used.
Technology is evolving, and businesses are changing. That is why it is essential to educate yourself in the business you claim to be an expert on. Although you’re an expert at what you do, remember, you can never learn too much.
Pro-Tip: Research your business and see where your revenue currently stands
- Not investing in an accountant.
We get it! Money is tight, and investing in help may seem like a waste of time, but it’s worth EVERY penny in the long run. You place your business at risk by not investing in an accountant or bookkeeper because you have no one as your second pair of eyes. If you don’t have the funds to hire a bookkeeper initially, use a close family member or friend to help you manage your business finances. As your business grows, use your own research to seek the best accountant for you.
Pro-Tip: Search Fiverr.com for accounting and bookkeeping. Another option is to create an internship social media ad describing what you are looking for in your ideal accountant.
- Refusing to separate the business account from the personal account
The day you begin to earn money for your services, you become an official business owner. So, now it’s time to start acting like one! This step is small but crucial. Keep in mind as a small start-up company, you don’t have to set up a business account; a checking account separate from your account will do just fine. As your business evolves and you incorporate it, you can then create a business account to keep track of your finances and taxes without your personal expenses getting in the way.
Pro-tip: Create a separate account for your business. Once you’re incorporated, apply for an Employee ID Number (EIN) on the IRS website.
- Forgetting about taxes.
It’s the five-letter word we’ve all come to despise, yet we can’t live without them— taxes. They were easy to maintain when working a full-time job, but now that you’re working for yourself, your business taxes lie in your hands. Starting off, accounting for your business is relatively simple; however, as your business grows and tasks become more pressing, taxes can be easily ignored. Try paying quarterly taxes on your income to keep this from happening to you.
Pro-tip: Remember, you are not a superhero. Take a deep breath and hire a professional to help you set up accounting processes for your business.
- There is no structure which leads to no business plan
Many businesses fail because they began their business without a plan. They simply look at trends and mimic what they see. Before you know it, they are out of funds and wondering what went wrong. Instead of wasting money on leading trends, it would be best to research your niche and find out what marketing strategies work best for you. After that, it’s time to create!
Pro Tip- Create a business plan that connects with your niche and stick to it.
Learn how to properly manage your books with EW Bookkeeping – contact us now!
Don’t become another status quo. Avoid these money mistakes and live out your own American dream. Need some assistance to get started? We’re here to help. Click here to see how we can assist you.