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When it comes to business, it’s all about the money. Maintaining a healthy bottom line is crucial if you want your new venture to thrive. Getting rich isn’t the best reason for being an entrepreneur, but your company must make a profit to stay alive. Sadly, most new business owners have little financial experience, which can cause many costly blunders. To give your venture the best chance, you must protect the money. With that in mind, here are six common mistakes to avoid.
Using The Same Accounts
When you go into business, you have to open business accounts. Rather than sharing your personal credit card and bank account with the venture, you must make sure it has its own. Although keeping all the money together seems convenient, it makes money matters much harder. Overspending becomes more likely and working out taxes turns quite complicated.
Spending Without A Budget
Everyone knows you have to spend money to make money. However, you shouldn’t do any spending until you have a budget. Without this essential tool, it’s impossible to know for sure whether or not you can afford the investments you’re making. When writing a budget, remember to include every expense and look out for any harmful spending habits you might be making.
Diversifying Before You Should
After an initial success, you should look to the future. Sadly, rather than investing in the business as it is, some entrepreneurs mistakenly diversify prematurely. When it’s time to expand, you should look into the potential profits of different products. If you sell on Amazon, you can use an Amazon revenue calculator for this. However, you shouldn’t take this step too soon.
Pricing Products Too Low
Whatever you sell, the price must be right. Most of the revenue a business generates comes from sales. This means that pricing your goods too low could have serious consequences. Many business owners set a lower price to attract customers, but then struggle to cover overheads. While being affordable is important, you should still be paid fairly for the goods you provide.
Hiring A Bad Apple
Many business owners hire cheaply, rather than smartly. Unfortunately, this often leads to much higher costs. The recruitment process is long and expensive, so you don’t want it to carry on longer than necessary. If you hire the right people, it shouldn’t have to. When you employ bad apples, on the other hand, you eventually have to replace them, which is a lot of hassle.
Neglecting That Emergency Fund
Going into business isn’t without risk. Things go wrong each day in the business world, costing companies and their owners. When faced with an unexpected cost, it’s important that you have the money to cover it. If you don’t, you’ll have to borrow, which means putting the business in debt. With a business emergency fund, you always have savings for when you need them.
Money keeps the business world turning, so protect your finances by avoiding the mistakes above.