Money issues are absolutely the biggest pitfalls that entrepreneurs like you and I face. But the good news is that there are things you can do to help avoid these problems.
Here are seven of the most common money mistakes that entrepreneurs make (and now that you know them, you have the power to avoid them).
1. Overhead investments
Many entrepreneurs invest in things like renting an office and expensive equipment a lot sooner than they actually need to. These are usually expensive areas and can wreak havoc on your business. Don’t invest in these things until you really need to.
2. Underestimating miscellaneous expenses
Every business has miscellaneous expenses. Those are the ones that never made it into your business plan and were never imagined. But they will come up, so assume your miscellaneous expenses are going to be a lot bigger than you first thought.
3. Not testing before investing
Eager entrepreneurs will invest loads of money to perfect their product. But they do this before they have even tested it out to see if there is a market for it. So before it is perfect and has all the bells and whistles, do a test run on it and get some feedback.
4. Purchasing extravagance
Do you really need that expensive office furniture package? Probably not, even if there are prospects coming to see it. Spending money on things that you really don’t need yet is a big waste of money. That doesn’t mean you can’t have that cushy office set-up; it just means it should wait until the business can really afford it.
5. Tax avoidance
Entrepreneurs are often apprehensive to speak with an accountant, for whatever reason. Truth be told, you must meet with an accountant, as it will save you money in the long run. An accountant can do everything from helping you avoid tax penalties to setting you up with the right salary or making sure you are on track with your quarterly tax payments. The accountant is your friend, I promise.
6. Spending on do-it-yourself projects
Sure, as an entrepreneur you want to be able to hire contractors and outsource work. But you may not be in a position yet to do so. There are some simple tasks that you should do yourself, rather than hire an outside source to do for you. This will save money until you really can afford to outsource the task.
7. Hiring before you can afford it
Many entrepreneurs long for the day when they can hire their first employee. While this may be a great feeling, it should be avoided until the time comes that you actually need to hire someone. If you are not actually ready to bring on someone to do work, then you will be taking on a big expense with very little return.
Money issues literally make or break entrepreneurs. So you have to take every opportunity to be smart with the money you spend. If you take the time to avoid the seven mistakes above, you will be well ahead of the game.