Many small business owners read the stories of other tanked businesses with dread. While owning a business can be very rewarding, it is also a dance to avoid stepping on a financial landmine. Here are five of the biggest financial pitfalls to avoid in your business.
Not Having a Good Accountant
One thing you must be sure of is that you have a reliable accountant for your business. You use the numbers to make informed decisions about the direction of your business. When the numbers are inaccurate, you can end up making huge mistakes. Be sure to hire an experienced accountant with a good track record of success.
Working Hard, Not Smart
One way that you may measure your financial success is by how much effort you need to put in for the amount of profit you make. When you work hard instead of smart, you’ll see a greatly diminished reward for your efforts. In order to make the most of your business, only put in effort where that effort will bring in substantial profit.
Where possible, allow your employees to do the work. Your role should be to guide and make the big decisions, not to sit behind the desk and do paperwork. Outsource as much as possible; let your employees create value for you. When you are able to streamline your business and reserve your input for only the most important work areas, your financial success and your satisfaction will increase.
Hiring Friends or Family
At first, you may think that hiring friends or family is a good business move. Certainly, you want to have employees who you feel comfortable with and can trust on a personal level. Working around those you like can make the office experience much more pleasant. And finally, there’s the fact that you may feel obligated to help out a friend or family member in need by offering them a place in your company.
Hiring friends or family is one of the biggest financial mistakes that you can make. Often times, everything goes smoothly. But those times when the decision goes wrong, it usually goes horribly wrong. When an employee is not a good fit and ends up costing the company money, it is usually easy to remove the financial burden from the company by firing the employee. How would you break it to a family member that you are letting him or her go? Also, you may be more likely to place added trust on a friend, but what happens when that friend breaks your trust and wreaks havoc on your company? Simply put, hiring friends and family members is a financial liability.
Spending Too Little on Marketing
You may have all of the best staff or the highest quality products, but if no one knows about your company you’re not going to see enough business. One major mistake is not spending enough of your budget on marketing. Getting the word out there is a big part of your success. You need to make sure that enough people know about your business, because even a high conversion rate is not enough when the potential client pool is too small.
If you find that you don’t have enough money to spend on your marketing campaign, you may want to take out some additional loans. Where marketing is concerned, each dollar spent should create enormous returns in revenue if it’s done right. For this reason, don’t shy away from taking out extra money for marketing. A good financial resource like Advanced Funds Network can help you get the credit and funding that you need to make your business successful.
One big pitfall to avoid is becoming secure in your business returns. You may have had a great year last year, and this can cause some new business owners to feel like they’ve finally made it and can settle in and relax. However, a business is a dynamic operation, and you must remain on the ball all of the time to make sure that stream of cash continues to flow in. While it’s great to celebrate your successes, make sure that you keep innovating and improving your business if you want to continue to build on your success.
In summary, there are many things to juggle when operating your own business. Being vigilant and working smart can help you avoid some of the biggest financial traps in your business. Look out for the five situations above and you’ll be less likely to wind up in a financial predicament.