It’s pretty commonplace for startups to make money mistakes. In fact, it would be rare if you didn’t make at least one mistake regarding your finances as an entrepreneur. The Wall Street Journal explains that “there is no surefire playbook” when it comes to winning with a startup.
If you do enough research and have the right tools, you can reduce the chances of making a mistake and quickly recover in the event that you do make an error.
Here is a look at the most common financial mistakes first-time entrepreneurs make, along with solutions for overcoming them:
Mistake #1: Spending too much money on things you don’t truly need
Think carefully before spending on anything. No matter how much you think you may need it at the time, will it still be of use to you a month from now? A year from now? If it will be of use to you later on, will it be of use to you right now? Or should you postpone the expenditure? If you’re not careful with your purchases, you could find yourself in need of asset recovery assistance.
Solution: Think long and hard. Consult your financial advisor (if you have one), and use the You Need a Budget app. Available for all devices and platforms (including smart watches), YNAB is a very useful budgeting tool that will help you keep control of your expenses and purchases.
Mistake #2: Not being careful with the hiring process
Even if it’s just you for the time being, there will come a point when you will have to start hiring other people to help you. The costs associated with hiring employees can be significant. Not only do you have to have enough capital to cover training, recruitment fees, equipment and more, you also have to worry about losing money should the new hire be a poor performer. Even worse: what if the employee does something controversial and puts the entire organization at risk?
Solution: BusinessNewsDaily.com explains that successful companies have a hiring process “that includes attracting high-quality candidates and evaluating them” in a variety of areas. In addition to doing the usual background checks, you’ll also want to check their social media profiles. Use either SmartRecruiter or LinkedIn Recruiter for screening and hiring solutions.
Mistake #3: Failing to raise enough money
While there will always be circumstances that can’t be helped, you should ask yourself if you’re doing enough to raise money. Are you truly doing everything in your power to reach out to investors and impress them? Do you have enough money to cover expenses and any unexpected emergency that may occur? Sometimes you just have to be patient and wait until you can afford more supplies, equipment, utilities, technology, etc.
Solution: Have you been using Kickstarter to attract funding to your project? If not, it’s time to do so. Investopedia has a list of eight similar platforms to help small businesses with great ideas to raise money.
Mistake #4: Getting into too much debt early on
It’s not very smart at all for a startup to get into debt before they even really get going. The longer it takes you to get positive cash flow, the more debt you are going to accumulate.
Solution: Debt management and prioritization tools are a must. The Debt Free app is ideal for iPhones and iPads. It helps you to reduce debt by using the “snowball technique.” For Android, there is the Debt Payoff Planner/Calculator tool in the Google Play Store. It doesn’t even require a signup!
If you avoid making these financial mistakes, or at least get the recommended tools to help you deal with them, you will increase your chances of surviving the startup process. You might also be interested in being a corporate trader for certain areas of your business, especially if you find yourself with underperforming assets. The opportunities are certainly worth looking into.