Opening a small business is simultaneously exhilarating and frightening. You are embarking on a brand new endeavor that could go in many directions. On the other hand, no matter how much you prepare and think you are ready, you are frightened that your new small business is not going to be as successful as you hope. One way to ensure that your small business gets on the right track and stays there is avoiding common mistakes.
Four Mistakes to Avoid
If you are a new small business owner, here are four mistakes that you should try to avoid:
- Not knowing that cash crunches can sink businesses. Selling products and services to customers is the heart of most businesses. In many cases, there is a lag between the time the product or service is provided and when the customer pays for them. When you have money tied up in an unpaid invoice, it takes away from the cash you have available. If you have too much cash tied up in unpaid receivables, you may find your business cannot continue to function. Keeping the cash flow healthy is essential for your company to be healthy.
- Not realizing just how much cash you burn through each month. Many business owners, both experienced and brand new, severely underestimate the amount of cash they go through in a given month. That often leaves them cash poor and even struggling to pay monthly expenses and keeping the doors open. It is critical that any business owner understand and know how much he or she needs to keep running each month.
- Not doing enough research to find multiple sources of business financing. Many small business owners find themselves short on cash. They take the first bit of financing they can find. It might be a short-term loan from family. It might be relying on high-interest credit card cash advances. It might be taking the first loan they can get without considering the financing terms. Today, business owners have several options when it comes to obtaining financing. It is critical you know and understand the options available to find the best choice for your business.
- Failing to review and understand financing terms. Business owners are often desperate to get financing to open or expand their companies. In the frenzy of trying to obtain the financing, many small business owners fail to review and understand all the financing terms associated with a loan. High interest rates and severe penalties for being late on a payment are two of the financing terms you should be aware of before signing any loan.
Maintaining a healthy flow of cash is critical for keeping the doors to your business open. If you are looking for a way to free up the cash trapped in your unpaid invoices, consider invoice factoring. You may find it is the exact solution you have been looking for.
What are some of the mistakes you have made along the way in starting up your new business?
