You’ve probably heard the statistic before that approximately a third of all small businesses will go out of business within their first five years. Many times, that’s because they’ve poorly managed their finances. There are some financial issues that are beyond a business owner’s control, but you’d be surprised at how many times businesses fail because of completely avoidable financial mistakes.
Here are some of the most common examples:
- Poor pricing. The way you price your products or services can either set you up for success or failure. Overpricing will likely lead to a lack of sales, but underpricing could really hurt your margins and cause you to lose
money, even if you get a fair amount of sales. You need to do a lot of research about your industry, what your competitors can charge, what you can afford to charge to turn a profit and more. You also need to differentiate your product and educate your customers about why your product is worth the price you set it at.
- Lack of savings. So many small businesses fail to keep a proper amount of cash in their reserves. Even when you have low operating costs, there are times where you’re going to have slow or negative cash flow in the early going. You should have plenty of reserve cash for emergency situations and unplanned expenses.
- Putting too much on credit. If you plan out your finances carefully, you can rely on credit to an extent. But you still need to stay on top of your finances and make sure that your debt is manageable. If you just keep charging without regard to the health of your business’s finances, then you’re going to pile yourself under inescapable debt that will cripple your young company.
- Bad bookkeeping. If you don’t keep good records, you won’t be able to gauge the success of your business and you won’t have the numbers you need to properly monitor just how well your business is performing in individual areas. You could also make costly mistakes in invoicing, payroll and more.
All of these mistakes are very easily avoidable, so be sure to do your due diligence in making sure you are always on top of your financial game.
Copyright 2015 Viral Solutions LLC
by Thomas von Ahn | Chief Elephant Slayer
Viral Solutions LLC is a Digital Marketer Certified Partner, Infusionsoft Certified Consultant and a Mobit Certified Partner. We help overwhelmed small business owners duplicate themselves – so business can be fun again.