It’s no secret; entrepreneurs face a whole lot of challenges. And most of the time, these difficulties involve financial mistakes that keep them stagnant and do not allow their businesses to advance. Without money, our business is a “Hobby”, at least that is how the IRS in the United States considers it, many times. It is not the lack of money that challenges us, but what we do with it, how we manage it and how it enters and leaves out of our pockets. As entrepreneurs, there are many financial mistakes that we make, and that if we do not learn to avoid them, it can cost us a lot of money and time, which is the most valuable resource we have. Today I want to share with you some of those mistakes that challenge you as an entrepreneur and avoid if you want your business to grow.
DON’T WORK ON YOUR LIMITING BELIEFS
Not many people give importance to having a belief system that does not limit your growth; however, it is the number one cause why many entrepreneurs fail to achieve their goals and dreams. We are born into a family with an established belief system, and they pass it on to us. There is the school, community, and church; everyone has contributed, now it is your responsibility to evaluate those beliefs so that you acquire your own. Many ideas limit you in the financial area. Check which ones are sabotaging you to change them. For example, if you are one of those who think that “people do not have money,” you can start with that because it is not valid; there are many people who have money. One way to know if a belief is not reasonable is to ask yourself questions; the truth about something will give you the answer, consciously you ask yourself, Is this true? Will there be another option?
NOT KNOWING HOW TO DIFFERENTIATE BETWEEN “CASH FLOW” AND EARNINGS
One thing is how much you are earning, and quite another is your cash flow; you should never confuse these two concepts. The accounting of your business is too important to ignore; even when you have delegated that function to someone else, your responsibility is to know the basic concepts that will help you understand your company’s behavior.
MAKE UNREALISTIC INCOME AND EXPENSE PROJECTIONS
This is one frequent financial mistake because projections are often made out of emotion and not with reason – with what I “would like” to achieve and not thinking about the reality of the business and the market trend. A company is managed by being aware of each decision we make; it is not correct for you to project well below your capacity, but neither do you exaggerate in the numbers. Make sure the numbers are a challenge that forces you to do your best without extremes.
NOT HAVING WORKING CAPITAL
Just as everyone should have an emergency fund in their personal finances, the same should be for businesses. If you have a small business, you should start accumulating a minimum of six months of expenses as working capital. You must be covered if a client is late in their payments; if for external reasons you stop selling. Avoid this mistake at all costs. So that you live calmly, focused on growing your business, and not worrying because you do not know how you will pay the month’s expenses.
As you can see, there are many financial mistakes that entrepreneurs make or have made at some point. We must give the importance that it deserves to know our business numbers, know if our company is profitable, and make wise decisions that help us grow as quickly as possible. Want to know more tips to avoid future business financial mistakes? Stay tuned for the second part of this blog!