10 Mistakes That Can Ruin Your Business
Let's face it! We have all made a mistake or two in business that has cost us one way or another. You can avoid these costly mistakes if you learn from your own or the mistakes of others.
Read further to learn about 10 mistakes that can ruin your business if you keep repeating them.
1. Confusing profit and cash flow
Profit and cash flow aren't the same, but many new entrepreneurs aren't aware of this. With simple financial education, you can learn the differences between the two.
Profit is your business's income after you've paid all your expenses.
Cash flow is the inflow and outflow of funds into and out of business and is often divided into operations, investing, and financing.
Ensure you assess your monthly profit and cash flow separately to determine how your business is doing each month.
2. Being sloppy with record-keeping
Business owners are busy and can get sloppy with their record-keeping, which can be detrimental to your business. When you're assessing your accounts and cash flow, ongoing record-keeping will make it easier for you to know the exact state your business is in at any time.
Good record-keeping will also ensure you're ready for tax season or if a taxing authority requests to audit you.
3. Not taking all available tax deductions
Ensure that when you're doing your taxes, you're benefiting from all deductions that are available to you. If taxes are an expense, you should examine them and look for methods to save money just as you would with your other costs.
Standard deductions can include the following:
- Salaries and wages
- Office supplies
- Home office
Do your homework, chat to your accountant to get a complete picture of what you can deduct, and then take advantage of it.
4. Waiting too long to apply for credit
One of the biggest mistakes any business can make is waiting too long to apply for credit. Simply put, business owners wait until they need it, which makes it harder for them to get it.
If you apply for business credit when your company is growing, you'll have a better chance of getting more. You'll have it (and more of it) when you need it to help you get through tough times.
5. Not controlling your costs
Refrain from spending unnecessarily. Costs pile up over time, and you want to have a positive cash flow.
Mistakes to avoid include not hiring your best friend's son to work for you when there isn't a position for him or buying a new vehicle for the office when it doesn't align with your budget. This will shoot up your costs and bring your revenue down, so don't spend all your profits.
6. Not collecting clients' payments on-time
We all hate having to ask people to pay us money back that's owed to us. In business, it can still be a tedious task, but it needs to get done. Hire someone who is skilled in collection calls and can collect outstanding payments. Ignoring this can ruin your business very quickly, as you will have no funds flowing into your business.
7. Setting Unrealistic Financial Goals
Many new business owners set high financial expectations for their business yet struggle to get their business off the ground. Setting unrealistic goals can bring you down emotionally and hurt your credibility.
Instead, set goals that are realistic and attainable, and ensure you track your progress. Your business will have a better chance of being a success if you do this.
8. Not keeping up with market changes
Keeping up with the times is a significant mistake in terms of company models. Markets change, and standing still while technology and competitors advance can cost you clients, which might lead to your company's downfall. By reading papers, attending conferences, and networking with others in your area, you can stay on top of your market.
Prepare yourself as much as possible if a huge shift is on the horizon. It can be pricey to keep up with market developments, but it is a necessary investment.
9. Hiring wrong people: expense vs. expertise
It can be a costly mistake to hire the wrong people. It's not easy finding the right staff but putting in the effort to recruit and retain the right people will benefit you and your business.
Training can be costly, and every time you have to spend money on paying someone to learn a new skill, it's money that can get put to better use elsewhere in your company. Hiring the wrong employee and keeping them on board can hurt your company in various ways, especially if they're unmotivated or lacking the skills to get the job done.
10. Trying to Do It All
Another big mistake that can ruin your business is believing you have what it takes to do everything yourself. While you may be able to do everything, you might not do everything well. A business owner is like every other person, and that is that we all have different talents.
Your job as a business owner is to hire staff in positions they're skilled in and where they can focus on their main talents to the fullest. A good rule of thumb is to hire people with solid skills in the skills you are the weakest in to balance each other out and run your business smoothly.
Let Baystate Advisors Group Help You
Working with a Growth and Profitability Advisor can assist you in developing a path to success and develop and implement a step-by-step plan.
At Baystate Advisors Group, we offer the following services to help you build the business of your dreams:
- We offer outsourced accounting services
- Part-time CFO/Controller services
- Tax preparation to small businesses
- Accounting advisory services to help your business increase its growth and profitability
Please contact us if you'd like a free consultation to learn more about how we can assist you.
We can find more profit for small business owners in 48 hours!