Every new business is different and each has its unique sets of challenges. Starting, building and managing a business is not easy; and while not all mistakes are fatal, some have a profound impact on the foundation of your business.
From personal experience and working with startups, creatives and nonprofits, I see four common new business money mistakes.
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Let’s break down these four common money mistakes new entrepreneurs make and ways to learn from them:
- No sales process
Generating sales is a process you must define early in your business.
“To scale your company’s revenue growth, you will need a sales process,” Joshua Feinberg, Chief Marketing Officer of Vic.ai, said. “You need a way to get found early and be seen as a trusted advisor, a subject matter expert and an educator. When you do this the right way, your sales team can better position themselves as consultants and advisors.”
Nothing can replace a sales process. Without one, you won’t make any money no matter what tricks or gimmicks you use.
- No cash collection process
Even though generating revenue may be your top task, cash is king. If your cash flow is off, it will limit how you can conduct your business.
You need cash to fund your business. When you make a sale, you must develop a system of collecting your cash on time so that you can invest it into your business. Since most, if not all, businesses experience peaks and valleys with their revenue and cash throughout the year, it’s paramount to get a handle on collecting cash.
- Undercharging with no plan to raise your rates
In the beginning, undercharging is normal and acceptable. However, you must have a plan to raise your rates as you build your client base.
“There’s a good chance you are undercharging if you don’t get push back on your rates on a regular basis,” Chris Do, founder and CEO of The Futur, said. “Aim a little higher than what you think someone will say yes to. You’ll be surprised how often they say yes.”
Raising your rates may be tough at first, but it’s necessary if you want to be taken seriously.
- Sloppy financial record keeping
Sloppy financial record keeping will give you a distorted picture of your business. In addition, mixing your personal expenses with your business expenses can cause tax ramifications if you’re audited.
“Growing revenue and the bottom line is a focus for many businesses. You cannot grow something unless you properly measure it,” Kelvin Joseph, CPA and CEO of Kool Kel Marketing, said.
Solid financial record keeping will help you make properly informed business decisions. You’ll be able to plan for future growth, direction, investment and taxes.
You need a system to generate revenue and collect cash to sustain your business operations. You also need a plan to raise your rates so you can continue to attract clients while placing value on your time and skills. Having the proper financial infrastructure in place will prepare you as you grow and as you attract investors.
You need someone to keep track of everything so you can avoid trouble with the IRS, and hiring an accountant to handle this will make these things easier for you. The earlier you do this, the better.
While much of your startup journey will still be trial and error, avoiding these mistakes as best you can will increase your chances of success in your new business.