When building a business, it’s easy to fall into financial traps that end up putting you in a whirlwind of debt, obstacles, and frustration. However, with the proper planning and a few key tips, those traps are easy to avoid. Read on to get the top 5 financial mistakes you don’t want to make, and ways to avoid them:
1. Selling yourself short. When you start a business, you may be tempted to lower your prices in order to attract new customers. As a general rule of thumb, it’s always better to sell fewer units at a slightly higher price than more units at a lower price. Take the time to research pricing structures to ensure you’re staying competitive within your industry.
2. Hiring too many overhead employees. Starting a business can often be overwhelming. While it’s sometimes necessary to hire extra employees to assist with phone calls or back office support, it can definitely eat up a lot of cash without replenishing it. Consider absorbing these tasks or finding a service that assists with back office support.
3. Hiring before the cash is in the bank. At times, it will seem like a smart decision to hire in anticipation of a heavy workload, but it’s important to remember that you don’t really have the cash until it’s in your bank. If it’s absolutely imperative to hire, consider utilizing factoring services, which allows you to get quick funds for payroll and other upfront costs.
4. Counting on one major source of revenue. As the old adage goes, don’t put all your eggs in one basket. Look at your revenue as if it were a portfolio – make sure it’s diverse and reflective of several customers so that if major streams of revenue disappear, your company is still thriving.
5. Not utilizing available financial options on slow-paying customers. It’s inevitable that some customers will pay slower than others. Consider using a service like accounts receivable financing for those customers, which will allow you to access working capital and keep your business going.
Want more business finance tips? Continue to check back on our blog, or contact one of our expert factoring consultants.