financial pitfalls

Keep Your Startup Growing by Avoiding These Financial Pitfalls

You put a lot on the line when you start your own business. You’re committing yourself to long hours, hard work and a great deal of uncertainty. And if you’re expecting to brave the shark tank with a huge influx of cash from investors, think again.

Venture capitalists account for only 0.05 percent of startup funding. If you’re like most entrepreneurs, you’ll be risking a significant chunk of your personal wealth in starting up your business.

Nearly 77 percent of startups depend on their founders’ personal financial contributions to stay afloat in the beginning.

With so much of your own blood, sweat and tears on the line, it’s crucial to keep a close eye on your finances while building your new business. That means being smart about your spending and avoiding some of the most common mistakes entrepreneurs tend to make.


Related: How to Tackle the Financial Portion of a Business Plan

For instance, a lot of entrepreneurs slip up by believing they can afford to make large-scale purchases right away. They spend too much of their initial capital on expensive equipment or a high-profile property, and lose the flexibility they need to buy the smaller items businesses need to survive. You can avoid this mistake by playing the long game. You’ll need to sacrifice making an initial splash in order to keep your head above water.

Another trap many entrepreneurs fall into is putting too much of their personal money into their enterprises. If you can’t tell which dollars are yours personally and which ones belong to your company, you’re headed for trouble.

If you’re not careful, you also could be at risk for liabilities that could ruin you. This is why it’s necessary to establish a separate bank account and line of credit for your company and avoid spending your own money on business expenses whenever possible. Your business should be an expression of your vision and passion, but not to the point that you can’t separate yourself from it.


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As an entrepreneur, you’re in for a long (and sometimes bumpy) ride. Whether or not you survive the experience depends on determination, luck and preparation.

For more details about common financial pitfalls and how to avoid them, take a look at the accompanying guide.

financial pitfalls

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