Money is truly oxygen in our world and especially in the world of a small business. When I started my small business marketing consulting practice 1.5 years ago, I had saved up only $15K for startup costs and emergencies. Luckily, I have barely touched that money and it’s still my emergency backup, not to mention my darling hubby who holds down a real day job. This article was really interesting and very accurate in reflecting my thoughts on how small businesses should treat money in the first few years. Here are some money mistakes to avoid:
1. Underestimating Your Needs
Everything takes longer in the trenches than it appears to in the planning stages. There are also costs you can’t imagine until you absolutely need that one linchpin item to complete a customer delivery.
2. Going Too Large
Entrepreneurs dream big, and our eyes are sometimes bigger than our wallets. Set yourself up for success by distinguishing between what’s necessary and what can wait.
3. Packing in the Payroll
I’m pretty sure living on minimum wage wasn’t what you had in mind when you started your business. Before you add anyone to your team, be very clear on what each position is to accomplish. With that clarity, look to independent contractors for their expertise. Hire full-time employees only when you can keep them busy in their core competency on a long-term basis.
4. Buying New
Resist the allure of new. Don’t overlook going-out-of-business sales. It can feel a bit vulture-esque, but remember, you’re doing your fellow entrepreneur a favor.
5. Failing to Mark the Exits
Always keep an exit plan with an objective marker. It could be a revenue number. It could be a level of debt. It could be a specific time frame. Coupled with your emergency exit plan should be a personal emergency fund. Three- to six-months’ living expenses is a large amount of money, but it gives you security while you tee up your next play.
The big missing component of course in this list is to plan your business spend, particularly your marketing spend. If you have no plan, how will you know which trade show to prep for or which network to join? Without a plan, how will you know if you’re spending too much or too little on your marketing?
Heed the advice above and make sure you’re never out of oxygen and can breathe clearly at all times.