Financial competency is the backbone of businesses all over the world. While money can be an intimidating aspect of entrepreneurship, it must be tackled head on in order to avoid becoming another part of the grim statistic that 96% of businesses fail within their first 10 years. That may be a discouraging percentage, but it is not impossible to succeed past that timeline. In order to do this however, you must first understand the best financial strategies to implement, but perhaps more importantly, the worst mistakes you can make. The following are just some of many poor money habits entrepreneurs tend to make when starting their business.
Failing to save
Obviously, saving money is a value instilled within us at an early age. We come to understand the importance of saving money very early on in our lives, and at no point should that value be placed on the back burner. A common notion that many entrepreneurs seem to believe is that spending more translates to earning more. While this can be true in rare cases, it is not a safe strategy for those who’ve invested their lives into their businesses.
No matter how small the amount, putting a certain sum of money away monthly can literally and metaphorically pay off enormously. You never know when a situation may arise in which you are forced to pay more than you had planned, or if an opportunity presents itself where an additional payment would be beneficial.
Disregarding smaller payments
This is an easy mistake to make at any stage throughout the development of your business. Keep track of every one of your business expenditures, including the seemingly unimportant ones. Regardless of whether you are spending $5,000, or $10, add it to your financial record. Smaller payments will add up over time. Be conscious of your spending in the first stages of your business, as hundreds of smaller payments can equate to one large sum of money that could spell the difference between success and failure.
Not managing credit cards
Though it is a smart decision to have a business credit card for company spending, there are plenty of risks that must be addressed first and foremost. Always pay off the debts accumulated as soon as possible, and only use them in dire situations, or those that require money earned directly by your business. It’s important to try and avoid falling victim to the high interest rate that comes with these cards, so assess your reason for spending, and whether or not using this card is a wise decision.