“AT ALL COSTS”
by Contributor
(Apr. 22, 2020) — As a small business owner just starting out, you’re going to have all kinds of advice given to you on what you need to do as a small business owner. You’re going to hear all kinds of information on “successful marketing strategies” and “effective tools for success,” etc… It seems like everyone has the entrepreneurial world mapped out for success.
Well, in your short blossoming journey as an entrepreneur, all you’ve heard about is what to do to achieve success… you’ve only heard the “good.” But what about “the bad and the ugly?” In the entrepreneurial world, there’s no one-size-fits-all success template. No entrepreneur is the same and neither are their journeys. What brought success to one entrepreneur may not be the right formula for you.
Everyone’s journey to success might be different, but do you know what area all entrepreneurs can unite in? All entrepreneurs can unite in knowing what NOT to do! Knowing what not to do is the second part of “the good, the bad, and the ugly”… knowing what not to do is “the bad and the ugly.”
This bad and ugly part of entrepreneurship resides in the financial sector. One of the biggest reasons why small businesses fail is largely due to the mishandling and wrong utilization of money. Because of the misuse of money, it sinks businesses, regardless of the industry you’re in or how much experience you have.
Whether you’re a “seasoned” entrepreneur or a newbie, the following mistakes are the biggest money mistakes that can put your business’s success in jeopardy. Avoid these mistakes at all costs.
Biggest Small Business Money Mistakes
Money Mistake 1: Failing to Insure Your Business
One of the biggest and completely avoidable mistakes that can ruin your business is neglecting to get your business insured. Lots of small business owners, especially home-based business owners, feel like just because they operate and run their business from home that they don’t have to or need to get their business insured… huge mistake.
Online businesses especially need to make sure they’re insured simply because they face more potential threats than brick-and-mortar businesses. Whether your business is an online business or a brick-and-mortar business, you have the potential to face claims of everything from negligence or libel and slander to legal defense costs and copyright infringement. The saddest part about failing to insure your business is that it doesn’t cost much and it’s going to cost you a lot more without it than it ever would by insuring your business from the very beginning. Insure your business with professional liability insurance and protect your business from potential threats that can destroy everything you worked hard for in your business.
Money Mistake 2: Mixing Business and Personal Transactions
Mixing business and personal transactions are a huge no-no for your business. The moment you get your business set up, you need to immediately open a completely separate bank account specifically for business transactions… failing to do so can cause major discrepancies in keeping track of your business’s cash flow.
It’s also a good idea to go ahead and apply for a business credit card as another way to keep track of your business’s expenses. Now, in applying for a business credit card, it’s important that you keep track of your business’s credit score… you definitely don’t want that to drop.
Speaking of business credit scores… that leads to the third money mistake.
Money Mistake 3: Neglecting Your Business Credit Score
IN owning a small business, your business is going to have a credit score that’s completely separate from your personal credit score. Just like personal credit scores tell the story of your personal history of debt, your business credit score does the exact same thing.
Your business credit score is affected by debt payment history and length of credit history and utilization ratio… just like personal credit history. But unlike personal credit history, your business credit history is a public record so you want to make sure you’re constantly checking your credit history to make sure it’s a good score.
With it being a public record, it can do damage to your business if you don’t keep up with it. You might be needing additional funding or a business might want to offer your business a trade credit, but the moment they take a look at your bad business credit score, they may have a change of heart and decline to offer you the trade credit.
Money Mistake 4: Making Unnecessary Purchases
The thing about this particular money mistake is that it’s highly reflective of your personal spending habits. If you fall victim to retailers’ tricks that get you to spend more, then you’ll probably fall victim to it with your business as well.
The biggest area where people fall victim is with “sales.” Consumer Reports states that what you think is a sale, isn’t a sale at all… Retailers are marking up the prices on certain items and putting a “SALE” tag behind it, but the reality is that you’re paying regular price for that item… it just looks like you’re getting a deal on it. Consumer Reports states that you need to do your research on that particular product and compare prices to see if you really are getting a deal on it.
You might see a new computer that has features your computer doesn’t… There may not be anything wrong with your current computer but the fact that the new one has things yours doesn’t, you go on and spend money on something your business doesn’t even need. Not only is the purchase unnecessary, but it’s also expensive too!