How To Avoid the Common Mistakes that Small Business Owners Make
If your ultimate dream come true involves small business ownership, you’re in excellent company. Millions of people feel exactly the same way. However, approximately 50 percent of all small businesses go under and have to close their doors within the first five years. Common (but avoidable) money management mistakes are often to blame. The following are just a few examples.
Mingling Personal and Business Finances
Don’t make the mistake of assuming you don’t need separate financial accounts for your business transactions. It doesn’t matter if your business is brand new. It doesn’t matter that you’re “just a freelancer”, don’t have employees, or operate solely out of your home office either. If you’ve earned money for the services you offer, you’re officially a member of the small business owner’s club. Separate accounts will help you keep your business finances orderly going forward.
Not Preparing for Adversity
Even the most successful small businesses eventually go through rough patches, so it’s important to be prepared in advance. Start a rainy day fund sooner rather than later. (Ideally, it should contain enough to cover around six months of operating costs.) When and if the going ever gets rough, that cash could mean the difference between keeping your business’s doors open and having to close them forever.
Not Considering Taxes
Small business ownership means it’s now up to you to plan for, save for, and pay your taxes. However, far too many business owners forget all about this until that April deadline is staring them straight in the face. Make the responsibility of taking care of your taxes easier on yourself by paying quarterly instead of trying to cover the full amount only once a year.
Launching Without a Solid Plan
Having a solid business plan in place before you even launch your new business isn’t just a good idea. It’s a critical part of your business’s potential success. Without one, you’ll have trouble meeting milestones and reaching goals in a timely manner. You’ll also be flying blind when it comes to managing your business’s finances responsibly, which absolutely puts you at risk.
Smarting out as small business owner means building a thorough financial blueprint to follow, and plans should be made for your fledgling company’s financial security from start to finish. If necessary, you can always hire a professional to help you evaluate your plan and examine it for blind spots. Preparedness is the ultimate key to your small business’s future success. With a proper plan in place, you drastically raise your chances of succeeding and meeting all of your goals.