7 Money Mistakes Entrepreneurs Should Avoid

By BankBazaar | January 10, 2017

Are You An Entrepreneur? Better Avoid These Money Mistakes

Choosing to live the life (and job) of your dreams isn’t easy. There’s more to becoming an entrepreneur than just juggling Credit Cards and Loan payments. It’s all about getting to do something you’re good at and willing to do.

You need to risk your financial security by giving up that secure nine to five job and probably put up with constant lectures from your friends and relatives about how becoming an entrepreneur is the worst mistake of your life.

But try not to worry too much. The important thing here is that you’ve finally decided to live on your own terms. What people say or think about you shouldn’t bother you anymore. Besides, nobody ever said that being an entrepreneur was going to be easy.

Additional Reading: Startup India – What It Means For Women Entrepreneurs

There should be two priorities on your mind—first, you need to break even and second, you need to make some great profits. If you have it all figured out, these things are not difficult to achieve. You can hit all your business targets as long as you know what money mistakes you need to avoid making.

That’s where we come in. As always, we have your back. We understand how overwhelming this journey can be and how difficult it can be for you to manage everything on your own.

Additional Reading: 5 Money Management Failures Of First Time Entrepreneurs

Most start-ups fail due to financial pitfalls. One wrong decision and your business could collapse in the blink of an eye. By staying clear of the most common money mistakes most entrepreneurs make, you can certainly avoid falling by the wayside.

To simplify things for you, here are some common blunders entrepreneurs make and tips on how to avoid them:

  • USP? What’s that?

If you aren’t aware of this term, USP stands for Unique Selling Proposition. In simpler words, it’s the quality that makes your product/service stand apart from your competitors.

Now, this may not sound like something that can affect the financial angle of your business, but the truth is slightly different. Unless you’re clear about the strong points of your product, trying to sell it to potential customers is going to be a pain. And the chances of getting your marketing strategy wrong increase as well.

So, the first thing you need to get right is the USP. The advantages? Potential customers get a better understanding of what you have to offer them. You also get a better idea of your potential target audience, which can help you execute your plans better.

What to do?

Conduct a SWOT (Strengths Weaknesses Opportunities Threats) analysis for your product/ service. Once you have it on paper, it’ll make things easier. Like any other game, you need to know your weaknesses better than your strengths. Why? The logic is simple. The chances of staying ahead in the game are higher when you know what could possibly go wrong with your business (before your competitors figure out your weaknesses).

Instead of giving them the chance to take advantage of your shortcomings, it’s better to work on rectifying them. Likewise, it’s crucial to identify all the possible threats to your business. These include your competitors (of course), inventory issues like lack of key resources, etc. You also need to carefully analyse the market and see what can work in your favour and what can have a negative effect.

Small things like launching a particular service/product at the right time matters. If you time everything right, the chances of things working in your favour increase considerably. This move can keep you from facing financial troubles later.

Additional Reading: Startup Failure: Dealing With The Financial Fallout

  • Short-term plans are all I need

Do you believe that short-term plans are all your business needs to succeed? If yes, you’re sadly mistaken. The business world moves dynamically. If you lag behind in making long-term plans, it could open doors for some serious financial trouble ahead.

When it comes to planning, you need to think on your feet. Relying merely on short-term plans won’t take you anywhere. The biggest advantage of planning ahead of time is that you get enough chances to prepare yourself for any lemons life might be planning to throw at you. Instead of getting cornered with financial troubles later, it’s better to think and plan beforehand.

Additional Reading: Financial Planning For Women

What to do?

While taking any decisions related to your business, you must always keep the bigger picture in mind. Before arriving at any conclusion, it’s always better to think about how your decisions might possibly affect you in the future. What may sound like a viable option now could turn out to be the biggest mistake of your career later.

Make sure you get the vision and mission statements of your business in place. These can act like guiding lights for you at times when it becomes hard to take a decision. You must know where your business is headed in a couple of years, but also in a couple of weeks or months. When you have a clear target (financial and otherwise) set in your head, working towards achieving it doesn’t sound complicated anymore.

Targeting and working towards achieving numbers always works better than working aimlessly. It can save you a lot of time, money and effort. A crucial part of financial planning is directing your resources to the right places. That can happen only if you have a clear picture of your long-term goals in mind. Not thinking long-term could turn out to be one of your biggest financial mistakes.

Additional Reading: Funds For Your Long-Term Growth

  • Market risks? Sorry, I don’t follow.

If you’re clueless about the risks that can destroy your dreams of running a successful business, you’re in deep trouble. It’s absolutely essential to test the waters before setting sail. It is imperative that you have a clear idea about all types of risks involved in your business.

These include risks related to the market, your product/service, consumer behaviour and even execution. Before launching your product, you need to find the right target audience. Once that’s done and you make changes in your marketing strategies and products accordingly, you can think of making some profits.

What to do?

Get into Sherlock mode and look for all possible types of risks that can threaten your financial security in future. Of course, risks are an important part of making your dreams come true, but you have to be careful. Well-calculated risks are good. But, trying to be a bit too brave may create havoc in your financial life and the future of your business. Keep that in mind.

Additional Reading: Evaluating Risk Tolerance And Appetite

  • Keep that capital investment small

Don’t underestimate the power of small things. When it comes to capital Investment, try and start small. You need to keep yourself open to the chances of failure. What if your business doesn’t take off as you expected? You’ll be left stranded, financially, in a sea of debt. You don’t want that to happen, do you?

What to do?

Instead of opting for a huge Personal Loan for your business, it’s better to start small. Use your Fixed Deposits or money you saved from other investment instruments. But, don’t use all of it. You should always have enough saved for an emergency. One more thing. Don’t fall prey to those fancy, short-term money making schemes. Most of them are just mere gimmicks to fool you and take your money. If you’re looking for ways to make some quick bucks, try better ways like investing in the stock market.

Additional Reading: Investment Options For Everyone

  • Love juggling? Time to rethink!

If you keep juggling and using your personal and business money interchangeably, you’re doing it all wrong! No matter how urgent the need is, you must never use your business money for personal expenses or vice versa. Why? It might sound like an easy way out, but it will more often than not mess with your finances (both personal and business).

What to do?

Divide and rule. Yes, that’s the solution to this problem. Always keep a clear division in your head. You must be clear about your personal and business expenses and use your money accordingly. Never mix the two! That’s why Current and Savings Accounts exist. They have been made to cater to two different needs. Use them accordingly.

Additional Reading: Difference Between A Current And Savings Account

  • Loan repayment planning? Who needs that!

Now you might think that repaying a Loan is a cakewalk. Sorry to burst your bubble, but it’s not! If you’ve taken out a Personal Loan for your business, repaying it could be a little difficult. Why? You’ve just started your own business. This is the first time you’re out there in that scary business world all by yourself. There’s every chance that things may go wrong. In such situations, it might be quite difficult to manage those Loan EMIs, won’t it? Precisely why planning is the key to your Loan repayment.

What to do?

Instead of borrowing a huge sum of money, borrow exactly what you need. Don’t be overambitious at the start. Go slow, start small and eventually you’ll make it big.

Additional Reading: 4 Golden Rules Of Personal Loan Repayment

  • Budgeting? I’m too cool for that!

Who says budgeting is essential only for people with nine to five jobs? It’s equally important for entrepreneurs as well. Building a business from scratch isn’t an easy job. Apart from all those sleepless nights and that hard work, it also involves a series of financial highs and lows. You need to be prepared to face all those lows. That’s why budgeting is necessary.

What to do?

Always plan your finances keeping your variable income in mind. You’re not a corporate employee anymore and hence you can’t expect a fixed salary every month. You must plan your business finances in such a way that a variable income does not hurt the day-to-day functioning of the business, including monthly expenses.

Additional Reading: How Budgeting Can Transform Your Financial Life

Running a successful business is all about taking some well-calculated risks, believing in yourself, and staying away from the money mistakes mentioned above. If you have all this under control, there really isn’t much you need to worry about.

Urgent need for money? We can help!

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