Are you a new business owner? Congratulations on your new venture! Now that you have decided to take a leap of faith, what can you do to mitigate risks that come with owning a business?
For first-time business owners, it’s easy to make the same mistakes that other entrepreneurs made in the past. Even the most successful entrepreneurs experienced ups and downs before succeeding. Now that you’re, by definition, a risk-taker, it pays to learn some of the money blunders that can cost you your business. The following are financial mistakes every fist-time business owners ought to know:
Waiting too long before calling an attorney
Lawsuits are time-consuming and expensive. They can tarnish your reputation, dimish your company’s value, affect your ability to make revenue, and even cause your business to fold. One can never tell when a lawsuit will happen, so make sure to work with the best legal solicitors in London early on.
Not paying attention to your business taxes
How you plan your personal taxes is different from how business owners do their taxes. When you’re not careful, you can get hit with a hefty bill. Pay attention to your business tax planning and stay on top of your taxes. Before meeting up with your accountant or tax advisor, review your monthly expenses and income.
Not reviewing your insurance policies
Every business needs to have the right insurance policies. This will help protect you from legal claims and costly damages. But it is not enough that you buy business insurance. One needs to review your policies every year to accommodate new risks that may come your way.
Neglecting profit margins
First-time business owners often get confused between income and profit. Take note that these two are not the same. By definition, income refers to the amount of cash your company earns. On the other hand, profit is the total amount left after paying all expenses from the revenue. Don’t get excited by the amount of income your company is making and keep an eye out on your expenses.
Not having a contingency fund
Even the most successful businesses can fall into a hard time. What more if you’re a first-time business owner who’s still trying to establish your name in the industry? This is the very reason you need to have a contingency fund to keep your business afloat when hard times hit your business. Saving up an emergency fund is an excellent way to be ready in case you need to pay unexpected expenses.
Overinvesting employees, tools, and equipment
To start a business, you’ll need to invest money to buy the tools and equipment necessary to create your products and services. You’ll also need to hire people who can help you achieve your business goals. But some business owners tend to overspend on these resources. Be conservative when it comes to your investments and be careful when planning your startup costs.
Not managing your time wisely
Time is a valuable asset. Unlike money, you cannot earn time no matter how hard you work for it. Managing your time wisely can help you accomplish more. Learn how to utilize your time wisely and encourage your employees to do the same.
Even with careful planning, it’s still possible to make financial mistakes. However, knowing what money blunders business owners often make gives you an edge over your competitors. Develop plans to mitigate risks and always find a way to effectively manage your business finances.