Did you know that 20%, or 2 in 10, small businesses fail within the first 356 days of existence? Are you aware that, by the conclusion of year two, 30% of small businesses cease to be going concerns?
While many different things factor into why so many small businesses don’t last, the most common reasons include financial management and cash flow issues.
If you’re starting up a business or have been in business for a short while, you’ll want to avoid mistakes with spending.
Here’s a look at 5 common spending mistakes you’ll want to steer clear of.
1. Mixing Business and Personal Finances
If you’re bootstrapping your business, it might be tempting to mix your business and personal finances. But it’s important that you not blur that line of distinction.
You’ll run into problems if you don’t have a separate business account from which you can draw on to pay for business expenses.
As you separate personal expenses from business expenses, you’ll want to look into getting a separate debit card connected to your business account. Check out these corporate debit cards to see what works best for your company.
2. Spending the Wrong Amount on Marketing
Another mistake you’ll want to avoid as a small business owner is spending too little or too much on marketing. So your best bet is to set a budget for marketing after some deliberate and purposeful consideration.
In order to figure out the right amount your company should spend on marketing, you’ll need to consider what you’re selling, who your target customers are, who your rivals are, and how to best get out your message.
3. Choosing the Wrong Workspace
When assessing your business spending strategy, you’ll also want to look at your office space. You need to be practical and realistic when selecting a workplace from which to run your business.
Some experts suggest that the cost for your office shouldn’t exceed one-fifth of your monthly expenses. That’s a good rule of thumb to keep in mind.
You might have your eye on a trendy luxury office space located in a specific part of town. But you need to consider how much you can afford and what type of office space works best for your small business.
This doesn’t mean you have to work out of your garage if you’re on a shoestring budget. But you’ll need to make fiscally smart decisions when seeking out a workspace that will work for your company.
4. Failing to Set Financial Goals
It’s also important that you get used to setting financial goals. You’ve likely heard the old adage that people who fail to plan actually plan to fail. There’s a whole lot of truth in those few words.
You need to set a budget, understand common business expenses, so that you know how much money is coming in and going out, know how to make sales or revenue projections and forecasts, and set realistic financial objectives.
5. Refusing to Get Needed Professional Help
It’s easy for entrepreneurs running businesses to try to do it all, like Jacks or Jills of all trades. But sometimes spending money means saving money…and avoiding headaches.
If you don’t have a certified accountant on your payroll, get one. You can retain the services of an accountant who is familiar with tax laws and other things. Chances are that your accountant will save you money over the long term.
Avoid These Mistakes With Spending
While there are many mistakes that small business owners need to avoid, this article focused on 5 of the most common mistakes.
Remember that a lot of businesses fail due to mistakes with spending. So if you want to increase your odds of succeeding where others have failed, you’ll want to steer clear of these errors and make better decisions.
Are you interested in reading more content that you can use to grow your business? Check out other articles on our website.