The difference between seasoned entrepreneurs and startup biz owners is how they handle money mistakes and take calculated risks. Australian top entrepreneurs like Mike Cannon Brookes, Scott Farquhar, and Ruslan Kogan might have made some common money mistakes in their lives which they made a turn and learn from it.
Money mistakes business owners do
While entrepreneurs take time to look for an opportunity in everything, there are certain money mistakes that a business cannot afford to take.
Not having a business bank account
One of the most common money mistakes business owners do is not having a separate business account. When it comes to keeping your finances separate, you can’t continue using a personal account. You would end up paying a hefty price for such a mistake.
Ignore the convenience of using a personal account and create a business account.
Having a separate bank account allows businesses to paint a more accurate picture of their “financial health.” It will help ensure that you have an idea of your monthly income and expenses and prevents the overlapping of some expenses as well. Besides, the Australian Internal Revenue Service has strict rules against the personal use of business assets.
Incurring large purchases and expenses early on
When starting a business, you might want to purchase the best furniture, equipment, pieces of machinery, and more. However, expensive items don’t necessarily equate to productivity, talent, skill, or grit of company personas. So, think carefully before making a huge splash on your savings.
Do you have old, in good-condition furniture for office use?
Can you make use of what you have for now and purchase later on when the business take flight?
You don’t need to spend on frivolous electronics, team-building trips, and luxurious. Build up your income first and set revenue goals before you invest in new fixtures.
Not capitalizing in free tools, items, and equipment
Similar to the one above, there are free tools you can use to upscale your business. For instance, you can make use of free digital marketing strategies such as social media, email marketing, or Google My Business than dipping funds for improving high-end marketing campaigns.
The first year of your business is crucial and it will set a tone for what is to come. Make use of free resources to grow your business. Do not rush and buy tools before your business can make a profit.
Neglecting your credit and using it beyond your capabilities
Make use of business credit by registering your company to a business credit bureau. This can ease paying some liabilities when setting up some needed assets in your business. However, it’s likewise important to pay what you owe in time.
One of the biggest money mistakes business owners need to avoid is accruing credit card debt while anticipating future revenue. As the saying goes, “never count your eggs until they hatch,” offers a pearl of great financial wisdom. Hence – you should be prudent when taking up credit.
It can pile up and exposes you to high-interest rates.
Having no insurance
Why do you need to think about insurance when starting up a business? We’ll tell you how it’s an important asset in keeping your business protected. Insurance your business can take are:
- Professional liability
- Health insurance
- Property insurance
- Auto insurance (delivery vehicles)
- Worker’s compensation
Many business owners don’t realize why small businesses need insurance policies. Little do they know that it protects your employees, boosts employee morale, safeguard assets, and improve professional reputation.
Little cash reserves on hand
Another one of those money mistakes small business owners to do is not having and planning cash reserves for an emergency funding of the business. Despite having a well-to-do revenue, adequate cash reserves can keep your business up in case a situation comes along. For example, COVID-19 pandemic, accidents, death of owner, typhoon, or forest fire, etc.
You’ll need financial resources to keep your business running without the need for applying an emergency loan.
There’s no exact number on how much your cash reserve should be. However, it is advisable that startups should have 5-10% in their bank account. They can increase that amount as the company grows.
Planning without a budget
Don’t tell us you’re running your business without a clear goal, objective, or plan. When this happens, it’ll be very hard to accomplish what you intended without drafting a rough budget to carry out your plans. What’s more, you won’t be able to see and know how much you are spending each month.
As a business owner, you should see your business towards its profitability by drafting a carefully planned budget for research, administrative, operational, and marketing expenses.