Today we’re featuring a guest post from Trisha Wagner of DestroyDebt.com.
The decision to start a new business is never easy; deciding to launch a new business in the current economy can be downright frightening. Statistics show that you are just as likely to fail as you are to succeed, and one of the main culprits that shut down new businesses during the start up period is money. Either the lack of money or accumulating debt can cripple your best efforts. If you are considering following your dreams and striking out on your own in 2009, consider these common financial missteps that often stop a business before it gets off the ground.
Attempting to do too much too soon.
A common mistake that many entrepreneurs make is taking on too much too soon after launching their business. There is some truth to the age old saying that you have to have money to make money. While you may be bursting with great ideas and endless energy when you start out, you must remember to take things slowly. With limited capital to work with you could easily be tempted to start numerous projects to get things rolling quickly. However each new project requires time and attention to be successful. If you stretch yourself too thin, both personally and financially you could be setting yourself up for failure.
Not sticking to necessities.
When you are first starting out, you have to remember to think small. It takes both time and money to build a successful business and unless you have unlimited funds to start out, you could quickly go in the red by not sticking to necessities. Use less expensive alternatives to accomplish core objectives and increase expenditures only as your revenue allows. Once your business is off and running you can re-evaluate your spending to reflect increased cash flow.
Trying to do everything by yourself.
You are only one person and it is important to remember to delegate. Even if you are starting out with a skeleton crew, remember you are the idea person. It is natural to be tempted to have your hand in every aspect of your business, and of course you should know what is going on on all fronts. However you are doing a disservice to yourself if you insist on micromanaging and not focusing on building your business. Let your employees do the job you are paying them to do.
Racking up debt early in your venture.
Try to keep a handle on your expenses and pay the bills as they come in. Many people are tempted to use a shiny new business credit card to keep cash on hand. This is a common mistake that can have drastic consequences as your business grows. Just as interest and accumulating debt can be a death sentence for your personal finances, the same theory applies to your business.
Failing to collect accounts receivable.
Sure you are just starting out and want to establish good relationships with your clients, but you must stay atop money owed to you. Don’t be afraid to be a bad guy, you are providing a service and in order for your business to thrive you have to be able to collect payments in a timely manner. A client who doesn’t pay isn’t a client you should worry about keeping. There are numerous invoicing tools available that make it easier to collect accounts receivables, which ensure your business will have the capital needed to survive.