When you’re trying to keep a small, fledgling start-up afloat, it’s all about managing a budget correctly. The only way you can nurture your start-up and really make it grow is maintaining a healthy bottom line. This sounds simple enough, but it’s pretty common for business owners to make various financial mistakes. These can lead to your hard-earned capital slipping away, and severely hinder your growth in the future. Here, we’ve listed a few of the common financial mistakes which you need to avoid.
First of all, overpaying taxes. Every business has a legal and moral responsibility to pay taxes, and the large majority of them do. However, it’s pretty common for new, inexperienced business owners to overshoot the tax they need to pay. This is usually down to misunderstanding the complex apparatus of tax codes, and mismanaging their expenses. To make sure you’re not blowing unnecessary capital which you might need in a few weeks, you need to be aware of the various tax benefits and reliefs that you qualify for. I know that this isn’t exactly the most exciting part of running a business. However, it’s an important step if you want your capital to go as far as it can. If you’re finding the whole thing a little complex, you can answer your tax questions with MCC4Tax.
Another big blunder which is far too common among start-up companies is diversifying way too early. After going through a little success at the start of their venture, a lot of business owners will start thinking about the future, and planning far ahead. The ones who have a good handle on ROI will take it slow, and invest in the growth of their company as it is. Then there are far more confident CEOs who will try to diversify before they’re really ready for it. I understand that you might get excited at the idea of expanding into strange new areas. In your early stages though, it’s usually best to stick to your original business model. Before you set out on any new ventures or diversify your business, take a long time to consider why you’re doing it, and all the risks involved.
Finally, failing to give yourself a safety net. This is an incredibly easy mistake to make if you’re having some great luck in the initial stages of your business. When the profit margins are appetizing, you’ll want to invest as much as you can into growing your business, and carving off a nice piece for yourself! However, there’s no guarantee that you’ll be able to enjoy this kind of plain sailing forever. Cash flow goes through ups and downs, especially when it comes to small businesses. To prepare for the downs, make a point of saving up a decent financial safety net. This can vary depending on your operation. However, I’d aim for a balance equal to about two months of operating costs. Fail to cover yourself, and you may end up watching your life’s work fall apart!