Business and entrepreneurship are stepping stones to generate tremendous wealth right? Yeah, it's been widely preached in the internet how businesses can improve a person's life.
And you might be thinking of a new business idea. You firmly believe that it's very potential and has high returns. Then, you started to save money to open that dream business of yours.
But in business, the first few months is very critical in establishing a good foundation of your business. And new small business owners oftentimes made mistakes at the start which lead their dream business to failure and close within or after a year.
That's why it's so important to know what these mistakes are and how to cope-up with them. Let's start knowing them.
1. No proper accounting
This is the first and common mistake that new business owners make.
You might be already aware that a business should have a written statement of sales, revenue, expenditures, operating expenses, net income. That's accounting. But do you make it in a proper way?
Let me explain to you in a very simple way how to manage your financial records. You should know your monthly sales, monthly expenses and monthly net income. If you know those numbers, it means you know how healthy your business is.
Those numbers will guide you when to borrow money and how much you should borrow. Always monitor your cashflow. It serves as the lifeblood to your business.
2. No alloted budget for Operating Expenses
You might have the capital to pay for the products or services you want to sell but you don't have money to pay for the operating expenses such as payment for the rent of space, employee's salary, electricity, water bills, maintenance for the machines or equipments, etc. You need a budget for at least 3 to 6 months operating expenses.
If you have that, you will no be stressed out due to upcoming payables for the operating expenses. Your business will survive for the first few months.
For the first few months, your new business might not generate enough income yet to sustain the operation. That's why you need a budget for at least 3 months operating expenses or else your new dream business will perish.
3. Capital and revenue made as one
Some new business owners will use their capital as their revenue. The capital should only be used to buy additional stocks, spent for additional services or buy machines or equipments. It should not be used as revenue that you will used to buy for your personal needs.
4. Not saving income
If your new business generate income for the first few months, you might be tempted to change your lifestyle by using that income to buy gadgets, high-end mobile phones, big LED TV. You might also be tempted to spend that income for a vacation.
This type of mindset will hinder your business to flourish or expand. If someone will compete with you or copy your business, you might regret that your income was spent unwisely instead of spending it to further expand your new business.
Take note of these mistakes. Make your new business stable, developing, adaptive to changes and self-sufficient for expansion. And make your dream business come true!
If you like these tips, help your friends or family who have businesses by sharing this post with them.