We live and we learn. If you want to start your own business then there’s a high chance that you will make a lot of mistakes along the way, but these mistakes can be costly and if you aren’t careful, you may find that they end up impacting you far more than you realize. If you want to do something about this or if you want to make sure that your business ends up being successful, then this is the guide for you.
Hiring in Advance
Don’t count your money until you know it is in the bank, There is a lot of wisdom in this. A lot of the time, when you run a business, you may find that you end up receiving a contract, or even the promise of revenue. That being said, there’s a big difference between having money and nearly having it but missing out. Until the money is in your bank, you don’t have it. You have to overcome the tendency to count it and assume that you have it until you actually do. If you want to do something about this, then you need to avoid hiring until you have the money.
Not Having a Lawyer
You may think that lawyers are expensive but at the end of the day, you may find that you end up spending way more money by trying to avoid them. For example, if you have a transport business and you need to hire a truck accident lawyer because one of your employees has crashed, then do it. If you are being sued, hire a lawyer for that as well.
Borrowing Money when you Don’t Need It
Borrowing money when you don’t need it is a major mistake. Sure, the bank may be willing to lend it, but that doesn’t mean that you need to accept it. The bank is there to try and collect interest and they are not there to optimize your financial performance. You are totally responsible for that. Sometimes two goals meet in the middle, but it doesn’t happen often. It’s not that bankers want to take advantage of you, it’s just that your objectives are different. You ideally need to borrow as much as you can to grow your business, but then don’t take out any more. If you can add your own savings to the pot, then this may allow you to borrow less, so keep that in mind.
Pricing too Low
Unless you are trying to be a really cheap business, you have to make sure that you sell fewer units at higher prices. High prices help to protect your profit margin and it can make a significant difference to your bottom line. If you set your business as a not-for-profit organization, then this will work against you so you have to make sure that you avoid this if possible. Conduct some industry research and also make sure that you are able to command high prices. If you price too low, then this will work against you, and you may even find that you are not able to make the progress you need with your business. If you want to work around this, price high and then drop if you need to, not the other way around.
Unless you have a very good reason, you should not offer credit terms to your customers. When you offer credit, you will be a bank as opposed to a product provider. Businesses don’t often fail because of profitability, because most business owners know how to make a profit. It comes down to simply bringing in more money than you are spending. That being said, a lot of businesses fail because they can’t collect any receivables. You have to make sure that you only offer credit when you absolutely have to do so. Most businesses will never find themselves in this position, so make sure that you keep this in mind if you can.
Relying on a Single Source of Revenue
Counting on a single major source of revenue is never a good idea. Unless you are proactively trying to build as much revenue as possible, you may find it contradicting. You need to look at your revenue as if it was a portfolio. You don’t want a lot of revenue coming out of a single source. Of course, when you start your business, you may find that you are often so preoccupied serving your first few customers that it is incredibly difficult for you to build other accounts. With time, you can then begin to build other sources of revenue, and this will help you when your major sources of revenue die off.