The world of business has a lot of uncertainties. There are times you’ll be on top and others when you’ll be struggling to stay afloat. One thing’s for sure, everyone makes mistakes but those who succeed are those who learn from them. So, below are a couple of mistakes most business owners consistently make:
Not having separate accounts for the business and personal finances
One of the most important rules of business is that you do not mix funds, personal and business accounts together. They need to be separated at all times. When keeping personal and business accounts separate, you can track all your expenses accurately and even make sure everything is in order when the time comes to pay taxes. This is possible because there isn’t an overlap between what you spend and earn personally and what the business is bringing in.
Unnecessary Purchases
Grow your business first before thinking about spending money on things that would be nice to have. Moving too fast could leave you bankrupt if you aren’t careful. So take time to come up with a well-paved plan for growth without putting everything you’ve worked to build at risk.
You might have a separate business and personal account but situations come up that force you to dig into your personal funds to finance a business necessity. Some will say don’t mix business with personal matters, but when you have the opportunity to grow your business, it becomes worth it in the end. Be as lean as possible with regards to both your business and personal life, especially in the initial stages while you’re still trying to grow your business.
No business insurance
Business insurance is vital to have in order to cover unforeseen events. Protect your business assets, cover legal claims, cover payroll expenses and keep other essential items. Imagine this: your employees go home after a hard day’s work, you do final bookkeeping for the night, and then go home. At 3 am, you get a call from the police department saying your business is on fire.
Having business insurance can possibly prevent bankruptcy of the business. Protecting yourself and your business from mishaps will provide peace of mind. If you ever need to use your insurance, make sure to speak with a professional to ensure you get the right business insurance for your needs.
No emergency fund
Having an emergency fund is important in your personal life as well as your business life. The purpose of an emergency fund is to provide prompt access to funds during critical moments. You might be thinking that since you’re insured against property damage, product loss, and equipment repairs, you’re good to go, and you don’t need any other backup. But considering the time it takes to process such claims, you’d much rather reconsider your stance on having an emergency fund. One reason being, insurance may not always cover every situation. An emergency fund allows you to continue operations and begin making repairs and replace any lost items or products that are either lost or stolen immediately. Having cash readily available could be what keeps the business running and saves you from having to incur debt when you have no choice but to borrow money in the event of an emergency.
Many financial advisors will tell you you need an emergency fund to cover unforeseen financial issues like home repairs, medical expenses, or a job loss that may happen in your life. The same may be true for your enterprise. Businesses can experience unpredictable challenges, and while loans may help you out in such instances, they might not always be the best option for your business.
Not paying your business taxes
As a self-employed individual, taking the initiative and paying your full tax obligations throughout the year is your responsibility. Calculating this accurately takes time and effort, so plan accordingly because this is all part of being a business owner. It might seem straightforward, but a lot of thought needs to be put into it. Consult your accountant on this and do what needs to be done.
You might lose money during your first year, which happens to a lot of businesses, by the way, but filing a quarterly tax report shows that you don’t owe anything. Save yourself from unnecessary trouble and get your taxes in order as soon as you can.
Not having a business budget plan
Not having a clear idea of how much you’ll bring in and how much it’ll cost to get it most definitely means you’re heading straight for failure. Having a clear plan is vital for your business’s profitability. Your estimate might be close to nil, but with a budget, at least you’ll know how long it’ll take to start bringing in money.
Set a number of budgets, for each stage, especially for your first year in business. You could have one a month before the official opening, another for after you launch your next product, and so on.
Failing to delegate responsibility
It’s crucial to your business’s success and your personal well-being to have staff who can help grow the business. It doesn’t have to be a one-man show. As a business owner, it’s on you to identify your strengths and weaknesses, and where you’re not particularly strong, hire someone who is. This allows you to focus your attention on areas where you can add the most value.
Remember that your time is valuable. You might save money by doing a lot on your own, but that doesn’t necessarily mean you’re making the best financial decision.
You won’t always make the right decision every time, but there are simple mistakes that can be avoided from the get-go.
With all of the above, I will see you at the top!
The Importance of a Business Plan