Common Financial Mistakes Startups Should Avoid
Budgeting right from the start is very essential to succeed in any business, and including all the possibilities that can lead to running out of funds should be there in the initial budget. Most startups fail to realize that and make their opening budget is so lean that it chokes them eventually when any shortage of resources happens. In fact, around 35% percent of startups fail within the first 2 – 3 years due to the lack of efficient financial planning.
Below are some of the most common financial mistakes that startups make, which you can easily avoid to ensure that your business blooms to its greatest potential.
Not Having an Investment Strategy
It is very important to have an investment strategy planned so that you can allocate the funds for your business growth in time. You can apply for a business credit card to manage the small inward expenses, while an SBA loan would be especially helpful when you plan to buy new equipment or expand your business operations. Just make sure that the repayments are done in due time so that you do not accrue any unwanted interest amount.
Not Managing Personal and Business Accounts Separately
Using personal accounts for business expenses is the silliest decision one can make. Although it might seem simpler at first, because you are the owner of the business, it would eventually make it very difficult to figure out which expenses were made for your business needs. Besides, keeping the accounts separate is also vital for filing your taxes properly and steer clear of any unwanted IRS penalties.
Not Including Own Remuneration
It is seen that most of the new entrepreneurs leave out their own salaries when planning the initial budget. They think that it would help them in saving maximum funds for the other expenses of the business. However, this is an amateurish strategy – you would surely need some income after a couple of months, and if you tried to take that out of the allocated funds for your business without planning it beforehand, it will surely blow out the resources in no time.
Not Investing the Profits Back into the Business
First-time entrepreneurs forget the need to keep on investing in the future and look to take the extra income home. This is another silly mistake; instead of taking more of the profits for self, reinvesting it into the business would surely help to reap more in the long run.