3 Financial Mistakes Start-ups Should Avoid
Starting a business is hard work and comes with a lot of risks. You need to create a product or services that prospective customers want, you need to find the right team that will complement your management style, and you need to stay on top of your finances. With all the possible pitfalls. No-one is an instant expert in business. Chances are, no matter how much you think you know, you could make some costly financial mistakes along the way.
Of course, everyone makes mistakes, that is how we learn and grow, but if you can minimise the mistakes that you make, then you can try and make sure that your start-up business has the success that it deserves.
We have put together three financial mistakes start-ups should avoid.
Not understanding the market
Market research should be a substantial part of the foundation of any startup. Not completely understanding your marketplace can prove detrimental to your business. If you don’t correctly understand your market, you may miss-pricing your products and services. Who is your customer, what need do your products and services fulfil, what do you have to offer, who is your competition, what differentiates your offering, what is your unique selling point why should customers buy from you? Without a good grasp of the market you plan to break into, you will likely make poor business projections.
Doing your own accounts
Knowing the difference between what you do best and what you do each day because the task “needs to get done.” Wasting time with a task that is not on your highest skill set is a misuse of your time and, your money. If you don’t have strong skills in financials, then recruit an accountant or retain one on contract to do your accounts and account to provide them to you in an easy-to-understand format.
Every business should keep detailed records of expenses and transactions, start-ups often overlook the importance of bookkeeping, but they are invariably reminded of its significance when the taxman comes to collect his dues. Also not keeping track of expenses also results in tax reliefs going unclaimed.
Ensure you maintain separate bank accounts for business and personal finances. You can get a 30-day free trial with FreshBooks small business accounting software here
Recruiting employees is exciting, to keep your costs as low as possible, you need to consider ways to save money on staffing. You might have some busy months, followed by a slow quarter. When starting up recruiting too many employees can have financial and psychological cost to your business.
As you start to build your team, look for people who have work experience of working in a start-up business. A good startup employee needs to have a specific mindset that isn’t often found in traditional companies. They need to be prepared to possibly work quickly and for long hours. And they need to be willing to take on responsibilities outside of their defined job description.
It good practice to set financial goals as it’s a way to measure how well you expect your business to be doing giving yourself a framework in which to operate and make important business growth decisions.
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