Common Mistakes Made by Business OwnersPosted by Factor Funding Co. on July 27, 2012
Many entrepreneurs fail within their first few years of operation. What's behind most of these business failures? Generally, business owners make common mistakes that eat up essential cash flow or incur large amounts of debt. Here are a few of the mistakes entrepreneurs make and how you can avoid them.
Too Much Spending
Spending too much, too fast is a common mistake for business owners. There are a few expenses that may negatively affect the company's bottom line from the start. One common error is overspending on overhead expenses that may not be truly necessary such as an additional office or a dedicated cleaning service. A similar mistake involves spending too much by investing in luxurious items when budget or low-cost items would work just as well. Think cheap printer paper rather than heavy bond paper that costs three or four times as much.
Other ways of overspending include hiring workers before your business is really stable or profitable enough to support the wages. When you hire employees you have to pay both their salaries and the necessary payroll taxes on their earnings every quarter. So, if you're even considering hiring workers, be sure to include a reasonable estimation of your tax liability before you make your decision.
Another spending mistake is hiring people to do work that you could reasonably do yourself. As mentioned earlier, you may be able to get by without a cleaning service, particularly if you have a small working space. Try to save money by arriving 30 minutes earlier to straighten up.
Neglecting to Protect Your Business
Surprisingly, some of the other common entrepreneurial mistakes involve skimping. While it's usually best to save as much money as possible there are some areas where you shouldn't attempt to cut corners. For example, if you owe taxes to the government, pay them in full as soon as you possibly can.
You should also invest a certain percentage of your earnings in quality advertising. The amount of profit you'll make as a result of your company's newfound publicity will offset the advertising costs. Another area where you don't want to skimp is market research. Take the time to thoroughly test your product before attempting to launch it into the market.
If you're concerned about establishing your business and being successful from day one, you'll want to avoid these common mistakes entrepreneurs make. By learning how and when to spend your company money you'll be in a better position to keep your business going for the long haul.