The one thing every business owner has in common concerns money.
Obviously, it takes more than a good idea to run a successful business. Proper financial management is crucial to surviving. Research shows 1 out of every 3 small businesses fails within the first two years, often due to poor financial management.
The most anxious moments for business owners typically aren’t about making a profit–it’s being short on cash. Small businesses, especially, need to exercise caution with their financial decisions.
The following financial words of wisdom come from the BusinessCollective, launched in partnership with Citi, which is a virtual mentorship program powered by North America’s most ambitious young thought leaders, entrepreneurs, executives, and small business owners.
Here are five common spending mistakes you need to avoid.
Overspending. Know your budget numbers day in and day out and don’t spend on things you absolutely don’t need. Did you check the shipping rates with multiple carriers? Are you making more than you’re spending? Numbers don’t lie. Get it together from the beginning and don’t sway from it. Hold your ground and make tough decisions if you have to.
Under-funding. Not having enough startup money can force you to tap personal savings or go into unplanned debt and jeopardize your or your family’s financial stability. Doing a proper business plan can help you understand what you will need for your business to survive through the startup period and avoid putting yourself and potentially your loved ones in a precarious position.
Paying Too Much in Merchant Account Fees. One critical component in your business is how you collect money from your customers. A large piece of that, for many companies, is credit card processing. It can be very costly to make a knee-jerk decision to set up what is quick and has a simple pricing model, rather than finding a reputable rep to save you on fees.
Unexpected Legal Expenses. What may seem like a simple legal question can result in a 20Â page memo and a $3,000 invoice. Some attorneys are willing to offer project rates or a cost cap on a project to help you budget your legal expenses. It is worth asking your attorney if they would consider a project rate or cost cap fee arrangement.
Not Keeping Track of Small Subscription Fees. A SaaS CRM is $40 a month, hosting is $50 a month, and social media management might be $20. Keep track of these in a spreadsheet so you know when your recurring outlay is getting too high and what you can consolidate. If you don’t, you’ll quickly find yourself spending several hundred a month for a package of services, half of which you might not even really be using any longer.