The best part about starting a business is that you don’t need much to get started. Most industries you want to get into will most likely have a low barrier to entry. If you want to make t-shirts, all you need are some designs and you can find a third party manufacturer that can print your designs on a slew of t-shirts. In this process, your only focus is creating the design and spending a few dollars to bring it to reality. A simple idea, like t-shirts, doesn’t have many barriers to entry – like most business ideas you’ll most likely pursue.
Getting started is a mindset thing – where you have to push yourself to want it. Growing a business is another thing. It requires discipline, research, and many times patience. Growing a business can be difficult and many new businesses fail within the first year. The biggest reason for failures is tied to financial growth – the mismanagement of money. Let’s take a look at the three biggest financial mistakes entrepreneurs make in their businesses —and how you can start fixing each one today.
Mistake #1: You think way too highly of yourself
A mentor once told me, it’s not about what you think you are worth, it’s about if someone is willing to pay you that determines your value. A common mistake that I see many entrepreneurs make when they’re just starting out is thinking way too highly of themselves before proving themselves. The lack of research into what the market is paying for your products or services usually doom first time entrepreneurs. In fact, I think this is the number one reason why many entrepreneurs give up in a few short months of starting. It’s one thing to have confidence in the products or service you’re going to deliver, but if you haven’t delivered on a consistent basis, over a period of time, it’s difficult to demand whatever price you want from the market. Instead, it’s critical you’re strategic in how you price yourself in the market. If you are not careful, you can find yourself pricing yourself out of the market, and quickly out of business.
HOW TO FIX IT:
- Research the market: Whatever busy you decide to start, there will be competitors in the market. Examine your competitors and see what price they’re charging for similar services or products. Ask yourself, “Am I competitive with the prices on the market?”, “What is the minimum I need to charge to survive in this industry?.”
- Evaluate your value: It always helps by starting with a brain dump. Look at your current state and determine what are you offering that no one else is providing to your customers/clients.
[If you’re running a service business this may help: How To Perfectly Price The Services In Your Business]
Mistake #2: Not understanding where your money is going
How many times are you going to avoid looking at your bank account? How often do you spend planning your business budgets? Many first time entrepreneurs struggle with finding funding, that is why it’s critical you understand how to be resourceful. The first way to make sure of that is understanding the basics to keep you alive in your business. It’s important to not only know how much you’re making, but where you’re money is going. When you’re first starting out the urge to spend is like second nature. I get it. You’re impatient, you have grand visions for your brand, etc. But one thing to note is that “the go big or go home” mentality, will send you home. Depending on your business, focus on the necessities to operate and eliminate anything else that doesn’t serve the businesses purpose.
HOW TO FIX IT:
- Track your sales and expenses: The first thing I did when I started my business is making an investment towards a system that would help me track where I was spending my money, how much I was making, etc. Quick-books, allowed me to stay on top of all my sales and expenses. And when it was time to do my tax returns, they have an integrated service with turbo tax which takes a few seconds to get your tax returns done. It’s been a simple solution for my business.
Mistake #3: Expanding way too quickly
Another significant reason why most entrepreneurs fail is that they spread themselves financially too thin. The urge to grow and expand many times drowns an entrepreneur from rising and succeeding in the market. Running a business is a long-term game. It takes patience and your resources, especially financially are limited. You have to be comfortable as a start-up and not mistaken yourself as a big business. Spend within your means and grow slow. If only after the first month of business, you’re hiring people. spending necessary without mastering your craft as a start-up, you’ll most likely fail before you even get started.
HOW TO FIX IT:
- Create a budget- determine how much you’re going to spend each month and before you think about making any more, focus your efforts on breaking even.
- Control the growth impulse: It’s so easy to look across the aisle at your competitor that has been in business for over 10 years and think you need to compete with them at the start of day 1.