Successfully managing your company’s finances is one of the essential tasks you do as a small business owner. Unfortunately, costly financial mistakes are devastating to your small business and can eventually lead to its failure. In fact, research shows that 18.4% of small businesses in the U.S. fail in the first year, and over 49% close in five years. Here are the top financial issues to avoid to keep your company fiscally healthy and growing.
1. Not Creating a Budget
Think of a budget as a financial forecast designed to help you avoid cash flow challenges or other money problems. It allows you to keep track of company finances in real-time so you can handle unexpected issues that inevitably crop up. If crunching numbers is not your strong suit, there are online tools available to guide you through creating a budget.
2. Not Having Adequate Funding
Your company’s financial future depends on having adequate funding to start and run your business. Writing a solid business plan helps you think through the steps needed to grow your company and the costs required at each phase. This enables you to gather enough money before it is needed.
Once you’ve determined the costs, you can seek out funding. Small business loans or microloans are excellent options to try first. You can also look for angel investors or try crowdfunding. Your business plan helps convince any of these financial backers you are serious about the success of your business.
3. Not Understanding Business Taxes
Business taxes can be confusing. Unfortunately, mistakes here can result in penalties and costly fines. Therefore, you must keep your company compliant with federal, state, and local regulations and file taxes on their due dates. If you don’t clearly understand the requirements, hire a professional to handle them.
4. Neglecting Free Social Media Marketing Opportunities
There is no charge to create a page for your business on FaceBook, Instagram, YouTube, and Twitter. You can publish content and posts that create a viral buzz for your business through these pages, all without impacting your advertising budget. First, build an online presence that attracts customers to your business by talking about how your products and services solve a problem or meet a need of consumers. Then, tell stories about your company’s values and how they affect your products. The key is to consistently publish engaging content to your current and potential customers.
5. Not Keeping Operating Expenses Low
Sure, you have great plans for your business, and you want to get started on as many of them as possible. However, that could lead you to spend more money than you bring in. It helps to focus on providing for your company’s actual needs instead of the wants. Do you really need brand new laptops, or will refurbished models work just as well? When it comes to staff, think through if hiring in-house is affordable right now or if you should outsource some of the roles instead. Stay focused on keeping costs low wherever you can and making your operations as efficient as possible.
Avoiding these common financial mistakes made by many small business owners helps you proactively set your company up for success. Taking the necessary steps to keep your business financially healthy gives you the best chance to succeed for many years to come.