Opening a new business can be scary, overwhelming, and exciting. Whether you already have your own business or are thinking about opening one, it's guaranteed to be one of the most important and risky investments of your life. Between hiring new employees and printing promotional materials, it's easy to get distracted and let your businesses' finances fall by the wayside. By knowing in advance what the challenges are, you can protect your financial resources and potentially save your business from having to close its doors forever.
New businesses tend to be wildly optimistic when it comes to forecasting future sales. Having a plan of action is essential for your business, and a sales forecast and expense budget are the road maps you'll need in order to guide your business towards success. In order to survive in today's economy, you'll need detailed financial estimates that including pricing strategies, expense estimates, and cash flow planning. When in doubt, experts recommend underestimating sales and overestimating your bills. Additionally, plan ahead for poor sales and emergency expenditures – you never know when a copy machine will break down or an office window will need repair.
If you treat your business and personal accounts as one and the same, it's a big mistake. Not only does this make it hard to properly track business expenses but, if you continue to do so and the IRS takes notice you could be facing some serious tax ramifications. As a small business owner, it's imperative to keep distance between your personal and business spending. First, establish a business bank account and designate a credit card strictly for your business. Tracking your business expenses will help you identify where to cut back and where to spend more – use a cash flow spreadsheet at the minimum.
Not Asking for Help
Whether it's asking questions about tax forms and contracts or getting advice on small business accounting, it's never a bad idea to ask for help. Even the savviest business owners know the value of an outside perspective. Even if you know Turbo Tax inside and out, it pays to have a team of professionals to follow the financial aspect of your business. By establishing a team of trusted advisors and business financial professionals you'll always have someone on-call who can help you steer your business in the most profitable direction. Remember: there's no such thing as a dumb question; what might seem dumb to you could actually end up saving your business.
Taking Too Many Risks
You're an entrepreneur. You're born to take risks – but that shouldn't mean endangering your profit and business by being overly aggressive with your investments. Once you've saved enough money with a virtual office, are past the break-even point, and have enough put away in emergency funds, you should still be sensible with your investment strategy. Don't put all your money in one investment; instead, diversify your portfolio by investing in different kinds companies – that way you'll have solid growth opportunity and protection against any significant losses.